Question: Please help view this case and give a more precise, really important and right way answer!! Freedom Power is an energy company that has been
Please help view this case and give a more precise, really important and right way answer!!
Freedom Power is an energy company that has been given responsibility for the overhaul of a power substation. The substation is old and is long overdue for some serious maintenance and repair work. For a standard procedure, another substation will take up the work whilst the substation is taken off-line for the repair work, but an unexpected event such as an abnormal surge in power demand could cause a power cut.
The government regulator imposes fines on energy providers for any disruption to the power supply. An energy company undertaking work that significantly raises the risk of disruption will take out insurance against the possibility of the fine. The cost of the insurance (which is fixed by the level of the possible fine) will dictate the intensity of the maintenance work, e.g. whether weekend and nighttime work is undertaken to reduce the time-period during which the power supply is at risk.
As the work will involve a significant increase in the risk of a power-cut, the project manager of Freedom Power is required to go through this process. Freedom Power requires insurance to be taken out against any fines that they may incur, before the substation can be taken off-line and the overhaul completed. In assessing the disruption risk-level, the project manager realizes that although the area serviced by the target substation is small, one of the key features is a medium-sized hospital, with 350 in-patient beds. According to the regulators fining structure, no significance is given to the fact that this building is a hospital, and the fine incurred for a disruption in power supply to this hospital is the same as for any residential building of its size. Furthermore, there are no regulations requiring a hospital to be treated any differently. On investigating, the project manager ascertains that the emergency generator for the hospital cannot be guaranteed to maintain power for more than 12 hours which is the period deemed by the hospital to be the probable maximum outage time of the mains supply.
The level of the fine, and thus the cost of the insurance, is within acceptable limits to proceed with the overhaul of the substation. The cost of the insurance is also low enough to mitigate the need for intensive working practices. However, the project manager is concerned. Without intensive working, the substation will be offline for well over the 12 hours during which the hospitals emergency generators can be expected to function. This will leave the hospital vulnerable to a black-out. Without an electricity supply, many of the crucial pieces of medical equipment in the hospital will be unable to function, leaving patients extremely vulnerable. Although this does not increase the financial risk to Freedom Power, the project manager feels that the danger to the patients in the hospital is severe enough to necessitate intensive working, to complete the overhaul of the substation within 12 hours. The project manager would like to recommend to senior managers that they agree to over-time payments, to allow overnight working to take place, but the project manager is unsure precisely how to proceed.
The project manager feels that there is a strong reason to perform intensive working on the overhaul of the substation, to protect the hospital from the risk of a damaging power cut. However, this decision is not motivated from a financial point of view. If you are the project manager, how are you going to communicate your judgement to senior managers? (33 marks)
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