ADVANCED even though they are less reliable 3) late




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Pullman, the chairmen and CEO of Gene modem asks Isaac Levy to form up a think
tank, a team to find solution for the endangering threat to their company. Mark
was chosen the group leader. The qualities a leader have is to handle
constructive criticism, sensible enough to deal with impractical criticism and
knowledgeable. The problem was that the life span of their product is very
short and it indicates to shrink more in future. Product development is roughly
two years in spite of all the efforts. So the aim was to cut the development
time drastically.

Rick was
given to teach project management in executive MBA program. On his first day he
was asked by a student to define project. By theoretical definition a project
is a set of activities which has a clear start and end, aimed to achieve a
particular objective. A general issue is that most of the time project didn’t
finish on time or within budget. Managers used to hire more people or use
expensive subcontractors to meet the schedule but it definitely causes over budget
or else they reduce the original project specification targeted. So finding the
official and unofficial reasons of overrun may help.

The example
Fred thrown in class is due to sixteen point two percent budget overrun the
payback time extended from three to five years. Now payback is the time period
on which original investment can be covered up. Three reasons they highlighted
for this are 1) bad weather condition 2) unforeseen difficulties faced by
suppliers 3) longer negotiation. That was the classic way of blaming external
world. The unofficial reasons are 1) forced unrealistic schedule to start 2)
choosing cheaper vendor even though they are less reliable 3) late training of
plant workers 4) loose supervision 4) too many wasteful meetings. Mark comes up
with a conclusion that lower level people are blamed more internally rather
than externally. Usually top managers see the overall picture while the lower
level managers are known with every actual detail. Uncertainties are the reason
of unrealistic situation. Cheap vendors are chosen to cut cost without noticing
their reliability as they are not able to cope up with uncertainties. One
should embed safety in time estimate for each and every step of the project.

through the articles for his research, Rick found a very important issue which
is ‘overrun and overdue’ in projects. He explained Jim about discovered pattern
in the class that the lower the position of the manager the more criticism he
has to face both inside and outside the company. Another important point Rick
found is that the payback period was extended and almost doubled. This can’t be
only because of budget overrun. There must be delay in completing the project.
As an example Rick mentioned that they chose cheap vendors over reliable ones,
which is the prime cost of delay, just to save 5% money on machines which is
less than 3% of the total project cost. The mentality of the companies is so
much into saving money that they forgot the main intention is to make money not
to save money.

discussing with the students in the class, Rick makes them familiar with PERT
and grant charts. Grant charts involves decisions when to start each path
unlike PERT. While critical path is the longest path on which any delay will
cause project delay but main discussion was on the other paths whether to
choose early start or late start. Early start involves loosing focus due to too
many activities at a time while late start involves unnecessary risk of
delaying the project. Late start are justified from investment point of view to
postpone until they are really necessary but it becomes as important as
critical path because it doesn’t have any time slack. Measuring the project is
also important. We should change the way we measure a project. Measurement
should take the manager to the point it needs attention. But in recent times,
measurement drives the project leader to another way which is damaging.

Fisher during his presentation on Theory of Constraints (TOM) highlighted his
thoughts on three most important breakthrough of TOM as New management
philosophy, new research method and robust application. Two most necessary
conditions he comes up with are controlling cost and protecting throughput.
Both are necessary. We can’t be satisfied with one without another. He views
the company as physical chain. All the departments linked with one another.

of any particular link automatically improves the overall organization that is
global improvement. We should strengthen the weakest chain. He mentioned the
reason of survival of fewer companies today is their nature of managing cost at
the start of the month and protecting throughput at the end. We can’t
compromise between these two. Throughputs are as important as managing cost
like linkages are as important as the links. In order to find the weakest link
the steps should be


Identify the system’s constraint

Decide how to exploit the system’s constraint

Subordinate everything else to above decision

Elevate the system’s constraint

Johnny gives
example from his experience that why theory of constraints claims that the main
problem which is constraint, many of our organizations belief that the
assumption of cost world are only valid.

As per Rick,
almost no any project finishes on time or budget. And if they do, its because
the original scope has been compromised. 

PERT is a
probabilistic approach, used mostly in the project management more than in
construction projects and is a 3-point approach method, which includes
optimistic time, pessimistic time and most likely time. Mostly it is used for
R&D purpose as it gives the accurate time.

management of construction projects requires knowledge of modern management as
well as an understanding of the design and construction process. Construction
projects have a specific set of objectives and constraints.

management is the art of directing and coordinating human and material
resources throughout the life of a project by using modern management
techniques to achieve predetermined objectives of scope, cost, time, and
quality and participation satisfaction.

project management in construction encompasses a set of objectives which may be
accomplished by implementing a series of operations subject to resource
constraints. There are potential conflicts between the stated objectives
regarding scope, cost, time and quality and the constraints imposed on human
material and financial resources. These conflicts should be resolved at the
onset of a project by making the necessary tradeoffs or creating new
alternatives. Subsequently, the functions of project management for
construction generally include the following:

1.     Specification
of project objectives and plans including delineation of scope, budgeting,
scheduling, setting performance requirements, and selecting project

2.     Maximization
of efficient resource utilization through procurement of labor, materials and
equipment according to the prescribed schedule

3.     Implementation
of various operations through proper coordination and control of planning,
design, estimating, contracting and construction in the entire process.

4.     Development
of effective communications and mechanisms for resolving conflicts among the
various participants.

5.     Scope, to
ensure that all the work required (and only the required work) Time, to provide
an effective project schedule.

6.     Cost, to
identify needed resources and maintains budget control.



Are any of the reasons for increasing estimates obvious in
construction sector projects? Explain?


construction sector, increasing estimates is very common. The concept of safety
margin is used in every sector, even in construction sector. If we consider
time estimate, each activity already includes a particular buffer time (safety
margin) in general. Also contingency and management reserves are considered for
safety in order to compensate known delays and unknown delays. These are
included so that even though delays occur due to some other reasons, they can
compensate. In very rare cases, if the project is completed on time, the firm
gets incentives for early completion than committed.

But in
present times, due to increased competitiveness in the present market, firms
are trying to reduce the margin to the minimum or even avoiding the margin.
This is done so that firms win the bids due to early completion time
commitment. But, as everything doesn’t go as planned, many hurdles occur
leading to going beyond the committed time which results in liquidated damages.

Construction, while planning minute activities, the safety margin is included
but very less. As the level goes up, like in Work Breakdown Structure, the
safety margin increases as the activity is treated as a separate deliverable.

estimates are added by considering the following aspects like material lead
times, the successor and predecessor activities, availability of related
manpower and equipment, activities linked to it like MEP etc., interdependent
activities etc.

In terms of
cost, the estimates of cost are a critical component of entire project,
especially in construction. The profits/fate of the project depends on the
estimation of cost in initial stages of the project. If there is any error or
omission of any component to be considered, the entire project turns into a
hectic problem.

So, while
estimating cost, the factor of safety to be considered should to be such that
the expected profit of project do not be disturbed or the project should not
loose competitive advantage during bidding.

estimating cost of the project, we need to consider the following:

The initial
set up required for the project, Indirect costs like office setups, staff
accommodations etc., the availability of materials and equipment nearby to the
project site, man power availability, etc., Climatic conditions of the project,
Soil conditions of the project, Political and Economic factors of the project
location, projects in order book of the contractor etc.

cost estimates may lead to other firms to gain advantage during bidding. So,
any firm should only consider safety appropriately, weather it may be in terms
of time or cost.