Project Background

You are Tom Martin, Planning & Scheduling Manager for M/s Consolidated Contractors working on the package No.3 which consist of the supply and installation of the Turbines, Generator, and associated equipments for the Hydropower generation project which is being built at Missouri. The contractor M/s Consolidated entered into a lump sum type of contract for this package No.3 with NHPC a government owned Company having a total contract value of $ 2,000,000.00.

Based on the performance at his previous project, Jill Collins was assigned as the Project Manager for this package No.3 by the senior management of the Consolidated contractors Company and was responsible for delivering the project on time and within the allocated budget. The delivery of this work package within the agreed contract duration of 60days was very critical for the overall completion and commissioning of this Hydropower project and in order to meet this timeline the contractor is required to work seven days a week. Due to the criticality of this package NHPC imposed a delay penalty in the condition of contract subject to a maximum 10% of the Contract value.

The complete fabrication and the erection of steel structure for the associated buildings within in the package No.3 was subcontracted to a specialized local contractor M/s Perfect Fabricators. The tasks being performed by the subcontractor were on the critical path.

Another major deliverable under this package is the supply of the Generators and Turbines. As per the approved Baseline schedule this activity has zero float was so this order was placed to a specialized Japanese Manufacturer. This contract was again on a Lump sum basis with delay penalty to avoid any risk of cost and time.

The special conditions of contract for the package No.3 clearly stipulated the need for the contractor to establish a baseline schedule from the start of the contract and the requirement for this schedule to be updated after every three days throughout the contract duration. On day 36 while updating the schedule, you discover that the progress on a group of five activities being performed the sub-contractor M/s Perfect fabricators was over-reported in the last report. Due to this error in reporting the progress, these activities have been shown to be more complete than their actual progress at site. On verification of the progress reported by M/s Perfect it was confirmed that the sub-contractor was not responsible for this reporting error.

The error in the progress reporting has resulted in a forecasted project completion date of six days earlier than it is supported by the current information. Since the previous forecast indicated that the work would be completed on day number 60 to meet the contractors contractual obligations, the revised forecast now indicates that the project would be completed only on day No.66. The liquidated damages as per the contract was $50,000 per day for any delay beyond the agreed contract duration. So there is significant financial impact for the target profit of the contractor due to any delay to the stipulated project completion date. The contract also has the provision for the contractor to an entitlement for an early completion bonus of $25,000 per day.

Jill Collins ordered for an investigation to find the cause for the incorrect reporting. Furthermore you were assigned by the Project Manager to meet with the team and recommend corrective actions for consideration and implementation. As changes to the schedule at this stage was not recommended and any rework was not acceptable to the Company. Hence the option for performing any duration compression by fast tracking was ruled out. Based on the direction, you met with the project team and formulated three corrective courses of action listed below, based on Crashing as a means for duration compression to address the problem:

1. M/s Perfect has proposed to increase the resource allocation to some of the outstanding critical activities at an estimated cost of $150,000. You have analyzed the subcontractors proposal and determined that it would reduce the project completion by four days. The subcontractor was quite confident (about 95%) to achieve this time reduction provided the variation order for the additional cost was approved within 3days. 2. You discussed with your Procurement Manager and found that the Generator & Turbines are ready with the manufacturer and by changing the shipment from sea to air their delivery time could be reduced from the current seven to three days. Despite the fact the meteorological department forecasted foggy weather; the airline was able to provide 100% assurance. The transportation cost by sea cargo was $ 10,000.00 while the air cargo would cost $ 90, 000.00 3. At the same time your discussions with the Construction superintendent revealed that this is possible to crash an uncompleted activity Electrical cabling work with an original duration of 22days. This activity was performed by your company and this crashing would reduce the activity duration up to a minimum of 14days. This additional source would cost your company $25,000.00 per day.

Upon checking with the schedule you realize the activity Electrical cabling work was a near critical activity having a free float of three days and on a parallel path with the Generator & Turbines.

Q No. 1. Refer to Case Studies and critically evaluate as per project controls theory?