The Auditorium Construction

21 July 2016

Case situation
Project- 25,000 seat stadium
Start from 1 January 2018, expected finish time:
1.5 years
Overhead expense of $5,000 per week for any
delay
Penalty of $25,000 per week of delay beyond next
1 July 2019.
Uncertainties: Strike and Weather in January.
1.) Possible labor strike in January.:
No Strike, P=50%;
Strike:+8 weeks , P=25%; +12 weeks ,
P=25%

Five proposals
1. Expedite the pouring of seat gallery supports
with extra cost $20,000 and cut 6 weeks
2. The same as proposal 1, but in addition,
expediting filling of the field with extra cost
$10,000 and cut 5 weeks
3. Expedite the roofing with extra cost $9,000 and
cut 6 weeks
4. Do nothing until Dec. 1. If it is cold, delay the
pouring or heating; If a strike occurs, expedite all
activities after strike over with extra cost $3000
per activity per week.
5. Do nothing until Dec. 1.

Precedence Network
8

16

30

BB
Subsurfac
Subsurfac
ee drainage
drainage

CC
Field
Field &
&
Truck
Truck
filling
filling

14

8
AA
clean
clean
site
site

16

12

EE
Excavatio
Excavatio
nn

12

16

FF
Pourin
Pourin
gg
concre
concre
te
te
footing
footing

30

42

D
D
Turf
Turf
installatio
installatio
nn

12

28

16

G
G
Pouring
Pouring
seat
seat
gallery
gallery
support
support

28 41
H
H
Pre
Pre
cast
cast
galleri
galleri
es
es

13

12
16

20

JJ
Installing
Installing
steel
steel
structure
structure

20 28
KK
Roof
Roof
erectio
erectio
nn

41

45

II
Pouring
Pouring
concrete
concrete
seats
seats

4
28

28

32

33

N
N
Light
Light
installation
installation

5
32

O
O
Scoreboard
Scoreboard &
&
facilities
facilities

48

M
M
Seat
Seat
paintin
paintin
gg

LL
Buildin
Buildin
gg
dressin
dressin
gg room
room

28

Critical Path: A E F G H I M

45

48
FINIS
FINIS
H
H

Proposal 1
8

16

30

BB
Subsurfac
Subsurfac
ee drainage
drainage

CC
Field
Field &
&
Truck
Truck
filling
filling

14

8
AA
clean
clean
site
site

16

12

EE
Excavatio
Excavatio
nn

12

16

FF
Pourin
Pourin
gg
concre
concre
te
te
footing
footing

Possible strike occurs in 42th week

30

42+X

D
D
Turf
Turf
installatio
installatio
nn

12

22

16

G
G
Pouring
Pouring
seat
seat
gallery
gallery
support
support

16

20

JJ
Installing
Installing
steel
steel
structure
structure

Actual Cost

No strike,
P=50%

No
heating
(P=67%
)

H
H
Pre
Pre
cast
cast
galleri
galleri
es
es

13

P(Strike)

22 35

Heatin
g
(P=33
%)

$20,000 $20,00
0

20 28
KK
Roof
Roof
erectio
erectio
nn

35

39

II
Pouring
Pouring Possible strike
concrete
concrete
39 42+X
seats
seats
M
M

4
28

Seat
Seat
paintin
paintin
gg

32

LL
Buildin
Buildin
gg
dressin
dressin
gg room
room

28

occurs in 42th wee

42+X
FINIS
FINIS
H
H

33

N
N
Light
Light
installation
installation

28

5
32

O
O
Scoreboard
Scoreboard &
&
facilities
facilities

4
$20,000[Expediting cost]+(42+1252) x ($15,000[Penalty]+
$500[Overhead]) =$51,000

Proposal 2
8

16

BB
Subsurfac
Subsurfac
ee drainage
drainage

12

EE
Excavatio
Excavatio
nn

25

C
C
Field
Field
&
&
Truck
Truck
filling
filling

AA
clean
clean
site
site

16

12

16

FF
Pourin
Pourin
gg
concre
concre
te
te
footing
footing

25

37

D
D
Turf
Turf
installatio
installatio
nn

12

22

16

G
G
Pouring
Pouring
seat
seat
gallery
gallery
support
support

16

20

JJ
Installing
Installing
steel
steel
structure
structure

Actual Cost

No strike,
P=50%

No
heating
(P=67%
)

H
H
Pre
Pre
cast
cast
galleri
galleri
es
es

13

P(Strike)

22 35

Heatin
g
(P=33
%)

$30,000 $30,00
0

20 28
KK
Roof
Roof
erectio
erectio
nn

35

39

II
Pouring
Pouring Possible strike
concrete
concrete
39 42+X
seats
seats
M
M

4
28

Seat
Seat
paintin
paintin
gg

32

LL
Buildin
Buildin
gg
dressin
dressin
gg room
room

28

occurs in 42th wee

42+X
FINIS
FINIS
H
H

33

N
N
Light
Light
installation
installation

28

5
32

O
O
Scoreboard
Scoreboard &
&
facilities
facilities

4
$30,000[Expediting cost] +(42+12-52)x
($15,000[Penalty]+$500[Overhead cost]) =
$61,000

Scenario of Proposal 3

Good weather
no heating
needed, done
within 48 weeks

No Strike

Bad weather, delay

4 weeks, no
heating needed,
done within 52
weeks.
Bad weather,
heating needed,
done within 48
weeks

scenario

Strike

+8 weeks strike,
no heating
needed, done
within 56 weeks
+12 weeks strike,
no heating
needed, done
within 60 weeks

Proposal 3
8

16

30

BB
Subsurfac
Subsurfac
ee drainage
drainage

CC
Field
Field &
&
Truck
Truck
filling
filling

14

8
AA
clean
clean
site
site

16

12

EE
Excavatio
Excavatio
nn

12

16

FF
Pourin
Pourin
gg
concre
concre
te
te
footing
footing

Possible strike and cold weather occur in 42 th week

30

42+X

D
D
Turf
Turf
installatio
installatio
nn

12

28

16

G
G
Pouring
Pouring
seat
seat
gallery
gallery
support
support

16

20

JJ
Installing
Installing
steel
steel
structure
structure

No
Heatin
heating
g
(P=67%) (P=33
%)

$9,000

H
H
Pre
Pre
cast
cast
galleri
galleri
es
es

4
22

$11,00
0

20 22
K
K
Roof
Roof
erecti
erecti
on
on

45+X

II
Pouring
Pouring
concrete
concrete
seats
seats

12

Actual Cost

No strike,
P=50%

41

28 41

13

P(Strike)

Possible strike and cold weather occur in 42th week

45+X48+X
M
M
Seat
Seat
paintin
paintin
gg

36

LL
Buildin
Buildin
gg
dressin
dressin
gg room
room

22

48+X
FINIS
FINIS
H
H

27

N
N
Light
Light
installation
installation

22

5
26

O
O
Scoreboard
Scoreboard &
&
facilities
facilities

4
$9,000[Expediting cost] +(48+12-52) x
($500[Overhead cost] + $15,000[Penalty])
=$133,000

Scenario of Proposal 4

Good weather,
no heating
needed, done
within 48 weeks

No Strike

Bad weather, delay

4 weeks, no
heating needed,
done within 52
weeks
Bad weather,
heating needed,
done within 48
weeks

scenario

Strike

+8 weeks strike,
Crash 4 weeks, no
heating needed,
done within 52
weeks
+12 weeks strike,
Crash 4 weeks , no
heating needed,
done within 56
weeks

Proposal 4
8

16

30

BB
Subsurfac
Subsurfac
ee drainage
drainage

CC
Field
Field &
&
Truck
Truck
filling
filling

14

8
AA
clean
clean
site
site

16

12

12

16

FF
Pourin
Pourin
gg
concre
concre
te
te
footing
footing

EE
Excavatio
Excavatio
nn

Possible strike and cold weather occur in 42th week

30
42+8
D
D 42+12
Turf
Turf
installatio
installatio
nn

12

28

16

G
G
Pouring
Pouring
seat
seat
gallery
gallery
support
support

P(Strike)

No strike,
P=50%

H
H
Pre
Pre
cast
cast
galleri
galleri
es
es

16

20

JJ
Installing
Installing
steel
steel
structure
structure

4-2=2
28
32

20 28
K
K
Roof
Roof
erecti
erecti
on
on

No
Heatin
heating
g
(P=67%) (P=33
%)

$2,000

49+2

II 53+2
Pouring
Pouring
concrete
concrete
seats
seats

12

$3,000[ Expediting cost] x 4

weeks= $12,000

$0

41

28 41

13

Actual Cost

Possible strike and cold weather occur in 42th week

51 51+1
55M
M55+1
Seat
Seat
painti
painti
ng
ng

LL
Buildin
Buildin
gg
dressin
dressin
gg room
room

28

3-2=1

52
56

FINIS
FINIS
H
H

33

N
N
Light
Light
installation
installation

28

5
32

O
O
Scoreboard
Scoreboard &
&
facilities
facilities

4
$3,000[crash cost]x4 +(56-52) x
($500[Overhead cost] +
$15,000[Penalty]) = $74,000

Scenario of Proposal 5

Good weather,
no heating
needed, done
within 48 weeks

No Strike

Bad weather, delay

4 weeks, no
heating needed,
done within 52
weeks
Bad weather,
heating needed,
done within 48
weeks

scenario

Strike

+8 weeks strike,
no heating
needed, done
within 56 weeks
+12 weeks strike,
no heating
needed, done
within 60 weeks

Proposal 5
8

16

30

BB
Subsurfac
Subsurfac
ee drainage
drainage

CC
Field
Field &
&
Truck
Truck
filling
filling

14

8
AA
clean
clean
site
site

16

12

12

16

FF
Pourin
Pourin
gg
concre
concre
te
te
footing
footing

EE
Excavatio
Excavatio
nn

Possible strike and cold weather occur in 42th week

30
42+X
D
D
Turf
Turf
installatio
installatio
nn

12

28

16

G
G
Pouring
Pouring
seat
seat
gallery
gallery
support
support

16

20

JJ
Installing
Installing
steel
steel
structure
structure

No
Heatin
heating
g
(P=67%) (P=33
%)

$0

H
H
Pre
Pre
cast
cast
galleri
galleri
es
es

$2,000

45+X48+X
M
M
Seat
Seat
painti
painti
ng
ng

4
28
32

20 28
K
K
Roof
Roof
erecti
erecti
on
on

45+X

II
Pouring
Pouring
concrete
concrete
seats
seats

12

Actual Cost

No strike,
P=50%

41+X

28 41

13

P(Strike)

Possible strike and cold weather occur in 42th week

LL
Buildin
Buildin
gg
dressin
dressin
gg room
room

28

48+X
FINIS
FINIS
H
H

33

N
N
Light
Light
installation
installation

28

5
32

O
O
Scoreboard
Scoreboard &
&
facilities
facilities

4
(48+8-52)x ($500[Overhead cost]+
$15,000[Penalty])= $62,000

Cost Analysis
No heating Scenario (67%)
Probability
Strike

Propos
al 1

Propos Propos Propos Propos

al 2
al 3
al 4
al 5

No Strike50%

$20,000 $30,00
0

$9,000

$0

$0

+8 weeks35%

$20,000 $30,00
0

$71,00
0

$12,00
0

$62,00
0

$133,0
00

$74,00
0

$124,0
00

+12 weeks$51,000 $61,00

15%
0
Heating needed Scenario (33%)
EMV
$24,650 $34,65
Probability
Propos 0Propos
Strike
al 1
al 2

$49,30 $15,30 $40,30

0Propos 0Propos 0Propos
al 3
al 4
al 5

No Strike50%

$20,000 $30,00
0

$11,00
0

$2000

$2000

+8 weeks35%

$20,000 $30,00
0

$71,00
0

$12,00
0

$62,00
0

+12 weeks-

$51,000 $61,00

$133,0

$74,00

$124,0

Recommendation
based on Cost Analysis-EMV method
Choose proposal 4
Proposal 1 would be the second choice

Reason
Proposal 4 has the lowest EMV, and it can end
up with no extra cost.
Proposal 1 would be the second choice
because it has second lowest EMV and is
better than 2, 3 and 5 if a strike happens.
If the CEO is adverse to risk, then select
proposal 1 which has smaller loss range
(from $20,000 to $ 51,000)

Time Analysis
Probability
Strike

Propos
al 1

Propos Propos Propos Propos

al 2
al 3
al 4
al 5

No Strike50%

42

42

48

48

48

+8 weeks35%

50

50

56

52

56

+12 weeks15%

54

54

60

56

60

Make span

46.6

46.6

52.6

50.6

52.6

Recommendation
based on Time Analysis
Take proposal 1
Proposal 4 would be the second choice

Reason
Proposal 1 & 2 has the shortest average
duration, but proposal 2 costs more.
Proposal 4 would be the second choice
because it has second shortest average
duration and is better than proposal 1 if the
cost-time ratio is considered.
If the CEO cares time the most, then select
proposal 1.

Other factors
Behavioral Employee morale and enthusiasm if
a strike occurs. Is this company brand oriented?
Organizational Will a strike and falling behind
schedule lead to layoffs or low morale? Does the
sub-contractor have the capacity to work in an
expedited scenario?
Political- Will local or state government become
involved in a labor dispute
Financial- how urgently does the firm need cash
flow? Will early completion lead to financial
benefits?
Cultural If labor force is mostly of the same
background, they may be more culturally or less
culturally likely to strike.

Decision making as the

president
I will choose proposal 4.
The first reason is obvious that it has the lowest
EMV. I am a risk seeker so I do not think the
broader loss rang would be a big problem.
Although proposal 4 has longer duration than
proposal 1 based on Time Analysis. Besides, there
is no extra bonus if we get it done earlier. For
financial reason, I will choose proposal 4 for sure.