UNIVERSITY OF MAURITIUS

FACULTY OF ENGINEERING

PAPER NO EXAMINATION DATE

Second Semester 2006/2007

MScPM/06S/6 MSc Project Management Thursday

Level 2 31 May 2007

SERIES PAPER TIME

May 2007 Construction Management 9:30 – 12:30 Hours

(CIVE 6207)

This paper contains SIX (6) Questions. Candidates are required to answer
Questions 1 and 2 (COMPULSORY) and ANY OTHER TWO (2) Questions.
Question 1 (COMPULSORY)

Read the case study carefully and answer the questions that follow.

George Ansley slowed his car, looking for Meridith Borden's driveway. Meridith
Borden 's estate was separated from the highway by a high brick wall, surmounted
with jagged fragments of broken glass embedded in cement.

For a moment Ansley sat in the automobile after he had shut off the motor and the
headlights. It was hard to bring himself to do what he had to do, but try as he might,
he could think of no other alternative.

He left the car, climbed the stone steps to the porch and pressed a button which
jangled musical chimes in the deep interior of the house. A moment later the porch
was suffused with brilliance, and Ansley felt he was undergoing thorough, careful
scrutiny. Then the door was opened by Meridith Borden himself.

"Ansley?" Borden asked.

"That's right," Ansley said, shaking hands. "I'm sorry to disturb you at night. I
wouldn't have telephoned unless it had been a matter of considerable importance-at
least to me."

"That's all right, quite all right," Borden said. "Come on in. I'm here alone this evening.
Servants all off. . . . Come on in. Tell me what's the trouble."

Ansley followed Borden into a room which had been fixed up into a combination den
and office. Borden indicated a comfortable chair, crossed over to a portable bar, said,
"How about a drink?"

"I could use one," Ansley admitted. "Scotch and soda, please."

Borden filled glasses. He handed one to Ansley, clinked the ice in his drink. and stood
by the bar, looking down at Ansley from a position of advantage. He was tall, thick-
chested, alert, virile and arrogant. There was a contemptuous attitude underlying the
veneer of rough and ready cordiality which he assumed. It showed in his eyes, in his
face and, at times, in his manner.

Ansley said, "I'm going broke."

"Too bad," Bolden commented, without the slightest trace of sympathy. "How come?"
"I have the contract on this new school job out on 94th Street," Ansley said.

"Bid too cheap?" Borden inquired.

"My bid was all right.”

"Labour troubles?”

"No. Inspector troubles."

(continued next page)

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Question 1 (continued)

"How come?”

"They're riding me all the time. They're making me tear out and replace work as fast
as I put it in."

"What's the matter? Aren't you following specifications?”

"Of course I'm following specifications, but it isn't a question of specifications, It's a
question of underlying hostility, of pouncing on every little technicality to make me
do work over, to hamper me, to hold up the job, to delay the work.".

Borden made clucking noises of sympathy. His eyes, hard and appraising, remained
fixed on Ansley.

"I protested to the inspector," Ansley said. "He told me, “Why don't you get smart and
see Meridith Borden?”

“'I don't think I like that," Borden said.

Ansley paid no attention to the comment. "A friend of mine told me, “You damn-fool.
Go see Borden.”' And . . . well, here I am."
"What do you want me to do?"
"Call off your dogs."
"They're not my dogs."
"I didn't mean it that way."
"You said it that way."
There was a moment of silence.
"How much are you going to make on the job?" Borden asked.

"If they'll let me alone and let me follow specifications according to any reasonable
interpretation, I'll have a fifty thousand-dollar profit."

"Too bad you're having trouble," Borden said. "I'd want a set of the specifications and
a statement by you as to the type of trouble you've been having. If I decide you are
being unjustly treated, I'll threaten a full-scale investigation. I don't think you'll have
any more trouble. I'd need money, of course."

"'Of course," Ansley said dryly.

"And," Borden went on, "after we start working together you won't have any trouble
with the inspectors. Just make your stuff so it's good construction, so that it'll stand
up, and that's all you need to worry about. Don't measure the placement of your
structural steel with too much accuracy. Make your mix contain just enough concrete
to do the job, and don't worry about having absolutely uniform percentages."

(continued next page)

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Question 1 (continued)

"That isn't what I wanted,” Ansley said. "I only wanted to have a reasonable break."

"You'll get it," Borden promised. "Mail me a retainer of two thousand dollars
tomorrow, pay five thousand from the next two progress payments you get, and give
me five per cent of the final payment. Then we'll talk things over on the next job. I
understand you're planning to bid on the overhead crossing on Telephone Avenue?".

"I've thought about it. I'd like to get cleaned up on this job and get my money out of it
first."

"Okay. See me about that overhead crossing before you put in your bid. We'll talk it
over. I can help you. A good public relations man who knows the ropes can do a lot
on jobs of this kind."

"I'm satisfied he can," Ansley said bitterly.

“I wish you'd seen me before you took that school job," Borden went on. "There might
have been more in it for both of us. You didn't have any public relations expert to
represent your interest in connection with the bidding?"

"No. Why should I need a public relations expert just to submit a bid?".

Borden shrugged his shoulders. The gesture was eloquent.

Ansley finished his drink. 'Tm sorry that I had to bother you at this hour of the night,
but the inspector found two places in the wall where he claimed the steel was
incorrectly spaced. It didn't amount to more than a quarter of an inch, but he
demanded I conform to specifications. I can't tear out the whole wall, and to try to cut
and patch now would be prohibitive. "

Borden said, "See that inspector tomorrow and tell him to take another measurement.
I think the steel's all right. The rods may have been bent a little off center. Quit
worrying about it. Tomorrow's a new day."

Ansley put down the drink, got up, hesitated, then said, "Well, I guess I'll be getting
on."

"I'm glad you dropped in, Ansley," Borden said, "and I'll take care of you to the best of
my ability. I feel quite certain you won't have any more trouble with the inspectors.
They don't like adverse publicity any better than anyone else, and, after all, I'm a
public relations expert."

Borden laughed and moved to accompany Ansley to the door.

"I can find my way out all right," Ansley said.

"No, no, I'll see you to the door. I'm all alone here tonight. Sorry."

(continued next page)

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Question 1 (continued)

He escorted Ansley to the door, said good night, and Ansley went down the steps into
the cold rain. He knew that his trouble with the inspectors was over, but he knew that
the trouble with his self-respect had just begun..

They had told him at the start that it was foolish to try to build anything without
getting in touch with Meridith Borden. Ansley had thought he could get by, by being
scrupulously fair and conforming to the specifications. He was rapidly finding out
how small a part fairness and specifications played in the kind of job he was getting
into now.

Ansley sent his car crunching along the gravel driveway. His anger at himself and the
conditions which had forced him to go to Meridith Borden made him resentful. He
had lost something important in that interview; a part of him that he couldn't afford to
lose, but he had yielded to the inexorable pressure of economic necessity.

Gardner E. S., The Case of the Calendar Girl, 1958

(a) What issue is being highlighted in the text? [5 marks]

(b) What, according to you, are the possibilities of reducing corruption in the
construction industry?
[10 marks]

(c) What are the possible impacts of corruption, as highlighted in the text?
[5 marks]

(d) What has Ansley lost? [5 marks]

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Question 2 (COMPULSORY)

Consider the following activities in a construction project with associated times, costs,
and preceding activities.

Normal Crash
Preceding
Activity Time Cost Time Cost
activities
(days) (Rs) (days) (Rs)
A - 7 6,500 4 8,000
B - 10 8,000 7 10,000
C - 5 7,000 5 7,000
D A, B 8 12,000 5 15,000
E B, C 9 14,000 6 18,000
F C, D 12 13,500 9 16,500
G D, E 14 12,750 10 17,750
H F, G 6 4,000 3 5,000

The crash information represents the minimum time in which the activity could be
completed and the associated cost is the best estimate of the total cost of completing
the activity within the shorter time. The choice is between normal time and cost, or
crash time and cost, i.e. it is not possible to save one day on a particular activity for a
proportionate increase in cost.

In addition to the costs for each activity, there is a site cost of Rs. 750 per day.

You are required to:

(a) calculate and state the normal time and associated minimum cost;
[10 marks]

(b) calculate and state the minimum cost and associated minimum time;
[10 marks]

(c) state and explain TWO practical problems which may arise when attempting to
use this planning tool.
[5 marks]

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Question 3

The Government of Mauritius is envisaging the construction of a 20-storey building at

Ebène. You have been appointed risk manager to prepare a risk management plan for
this project.

(a) Identify the risks involved. [10 marks]

(b) Propose recovery measures. [8 marks]

(c) Establish a planning to ensure your risk management plan is effective.

[7 marks]

Question 4

The Work Breakdown Structure (WBS) subdivides the scope of work into manageable
work packages that can be estimated, planned, and assigned to a responsible person
or department for completion. You have been appointed project manager for the
construction of a 20-storey building at Ebène. Outline how you would use the WBS to
subdivide the project, considering the following:

(a) Methods of subdivision.

(b) Develop standard template for future events.

(c) Numbering system.

(d) Number of levels.

[25 marks]

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Question 5

A building contractor produces two types of houses for speculative building –

detached and semidetached houses. The customer is offered several choices of
architectural design and layout for each type. The proportion of each type of design
sold in the past is shown in Table Q5. The profits on a detached house and a
semidetached house are Rs. 1,000,000 and Rs. 800,000 respectively.

Table Q5: Past houses sales

Choice of design Detached Semidetached

A 0.1 0.33
B 0.4 0.66
C 0.5 -

The builder has the capacity to build 400 houses per year. However, a housing will
not be allowed to contain more than 75% of the total housing as detached.
Furthermore, because of the limited supply of bricks available for type B designs, a
200 house limit with this design is imposed.

(a) Write the relevant equations governing the construction of houses. [10 marks]

(b) Determine how many detached and semidetached houses should be

constructed in order to maximise profits and state the optimum profit.
[15 marks]

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Question 6

Read the case study carefully and answer the questions that follow.

"Brian, two weeks ago you invited me to spend a day with the team responsible for
the expansion project of your plant. Can you tell the class a little bit about this
project?"

"Sure." Turning to the class, he says, "It's a six-million-dollar expansion project. For us
it is big. And it looks like it will be at least four months late. If we are late, let me tell
you, some people will be bent out of shape. That's for sure. So, yes, everybody is very
concerned. Wouldn't you be?"

I keep on asking, "Do you think that they know the penalty of not finishing this
project on time? I mean the damage to the company?" Before he has a chance to dig
himself a hole, I continue, "You are a major player on this team. Do you know the
damage?"

"Sure," he says. Then, expecting I will ask for the answer, he corrects himself. "If you
mean the dollar and cents impact, no I don't."

"What data do we need in order to answer this question?" I ask the class.

For a while nobody answers. Then, Brian, himself hesitantly says, "Expected sales?"

"Is this an answer or a question?" "More of a question," he admits.

"But you do know the answer. Let me guide you. We invest in a project in order to get
something that will bring us benefits."

"Of course."

"Therefore, it must be that the penalty of not finishing on time is related to the delay
in getting the expected benefits." Everybody nods.

"Brian, let's go back to your specific case. Why is your company investing, how much
did you say, six million, to expand the plant? What benefits do they expect?"

"We need the capacity." Responding to my signal to proceed, Brian adds, "We have a
very nice product line, of which we cannot supply enough to the market. I see now.
The damage to the company will be the delay in getting the additional sales."

"We want to quantify it," I remind him. "Now, a minute ago you were not sure if we
need to know 'expected sales.' Do we need it?"

"Without a doubt."

I smile. "1 told you that you know the answer. Just think clearly, that's all."

They laugh.

(continued next page)

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Question 6 (continued)

"Now that we've agreed that we need to know expected sales, can you tell it to us?
How much more will your company sell due to the additional capacity?"

"The forecast is two million per month. A very conservative forecast. The consensus
is that once we are up and running we will surpass it."

"Fine," I say. "Can we now answer 'what is the penalty of a delay?' Or do we need
more data?"

"It's a very good product," Brian explains. "The net margins are over thirty-five per
cent."

Now that there are more facts on the table, I repeat my question. "What is the penalty
for the company of a one-month delay in completing the expansion project? Brian?"
He doesn't answer.

"Two million dollars sales per month times thirty-five percent net margin. .." I feed it
to him with a spoon.

"Seven hundred thousand dollars a month. I know how to multiply. But I don't buy it.
This money will not be lost, it will just be postponed. Ah, I need to know the interest
rate."

"Forget the interest!" Fred tries to help. "Did you ever hear about cash flow?"

"Cash flow is very important;' I agree. "But in this case, also net profit is lost. Brian,
why do you claim that money is not lost, only postponed? Because you assume that
sales will be there also in the future. What other piece of data do we need in order to
examine your assumption?"

"I don't know." Nor does anybody else.

I try to help. "Brian, how long do you think your company will be able to command
such hefty margins on this product line?"

"Nobody knows. Maybe two years, maybe three. I see your point. It's not just money
delayed, a major portion of it is money gone forever." He swallows hard. "We are
talking about hundreds of thousands per month. That's huge."

Now I can return to my original question. "Do you think that the project team has a
clear idea of the damage the company will suffer if the project is not finished on
time?"

"No, they don't;' he confidently answers. - "Not realizing the dollar impact of a one-
month delay surely has an impact on the way your project team deals with your
subcontractors?"

While he thinks about it I turn to the class. "It is surprising, but unfortunately this is
the case everywhere. Most people involved in a project don't explicitly recognize the
penalties associated with each month that the project is delayed."
(continued next page)
Page 9 of 12
Question 6 (continued)

"Before we start to discuss how we should negotiate with our vendors, I want
everyone of you to realize the magnitude of this phenomenon.

So, take your time and think about the projects you are involved in. Now that you
know more, try to figure out the actual damage associated with a delay."

"We don't have to think about it," Mark responds immediately. "In our case the
penalty is mammoth."

"This is generally the situation," I conclude for the class. "Most people involved in the
project, often including the project leaders, are not fully aware of the magnitude of
damage associated with a delay. No wonder that when we negotiate with vendors or
subcontractors we do not pay enough attention to their lead time."

"You may be right," Roger comments, "but it's too late. We have already conditioned
the vendors to compete on price."

At first I'm surprised that Roger is bothering to participate. Then I realize that, at last,
we are dealing with his subject.

I think I understand what he meant, nevertheless I check. "What do you mean by

'conditioned to compete on price'?"

He doesn't bother to explain. He just states, "Competing on lead time! It's beyond
them."

Noticing my skepticism, he continues, "1 don't believe that it is possible to explain to

them that lead time is very important for us. Sometimes more important than price."
"What will happen," I suggest, "if in your request for proposals you write a sentence
like 'above X price don't submit, above Y lead time don't submit a proposal.' Don't
you think that will drive the message home?"

"To put a price in my request for a proposal?" He is astonished.

"Not a price. A cap on the price."

He doesn't answer. He thinks. So he is not as thick as I thought.

An attack comes from a direction I least expected. "Still, many vendors are
conditioned to compete only on price," Ruth declares.

"Why do you say that?" It's my turn to be astonished. "You know how many times I've
tried to squeeze shorter lead times from a printing house? Every time we run into an
emergency with our promotional material. Which means, very frequently. I try to
offer more money, I beg, I plead. It doesn't help. They behave as if their lead times are
cast in iron."

(continued next page)

Page 10 of 12
Question 6 (continued)

I struggle with it. It's hard for me to believe that's the case. But Ruth is very reliable. I
ask some more questions. Ruth fully cooperates. She will not twist around the facts,
but she struggles with me. Others contribute. Ruth is not the only one who has to deal
with printers. Finally the picture emerges.

You go to a printer and ask for a quote for a brochure. They tell you four weeks. You
come with all the needed final material in your hands, and you are willing to pay
more, and they agree to do it in four days. They simply have had very bad
experiences with clients wasting so much time making up their minds on all the
details.

"So there is a way to trade lead time for money," I conclude. "The key is to understand
the true impact for us, otherwise we will not be willing to pay for shorter lead times."

"We also have to understand the vendors' concerns," Ruth reminds me. "Otherwise,
even if we are willing to pay, they will not be willing to commit."

I fully agree. Now that this issue is cleared up, I can raise the other problem. 'We
heard from Mark how important it is not to tell a completion date to the person doing
the work."

"You do it," Mark emphasizes, "and you almost force the 'student syndrome'; then
lead times cannot be shortened."

"But what do we do with vendors?" I continue. 'We force them to commit to a delivery
date. Exactly the opposite of what we should do."

"You're telling us not to ask for commitment to a delivery date?" Roger is back in the
ring."

"That's exactly what I said."

"How are you going to convince a vendor to leave so much up in the air?" he
sarcastically asks.

I don't have an answer. "By talking his language," I say.

He narrows his eyes. "Last time you agreed to come with me to a meeting with a
vendor. Is your offer still open?" Smirking, he looks around.

I nod. Any other answer and I'll lose all credibility .Next time I'll be more careful
ducking questions. "

'Wednesday morning okay?"

"Yes," I quack.

"It will be interesting to see you talk the language of my vendor." Roger doesn't miss
the opportunity to turn the dagger. They all laugh.
(continued next page)
Page 11 of 12
Question 6 (continued)

I give them a pile of homework.

When they've all left, Charlene approaches me. Oh, no. She saw it all.

"It was very interesting," she says. "I learned a lot." I give her a dirty look.

"After this class, I have to rethink the whole subject of net-present-value. Something is
terribly wrong there."

I don't know what she is talking about. But at least somebody is satisfied with this
class.

(Goldratt E. M., Critical Chain, Productivity and Quality Publishing, 1997)

(a) What is the penalty for not finishing a project on time?

(b) What parameters are required to determine the potential damage arising from
a late project?

(c) How could a penalty clause prevent such damage from happening?

(d) Are there other solutions to potential delays in contract completion?

(e) Why does Charlene think that she has to rethink the subject of net-present-
value?
[25 marks]

END OF QUESTION PAPER

/nr

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