Skip to content
Textbook Guides

Solution Manual for Project Management: Processes, Methodologies, and Economics, 3rd Edition

Looking for textbook solutions? Solution Manual for Project Management: Processes, Methodologies, and Economics, 3rd Edition has got you covered with detailed answers to all your textbook questions.

Preview 16 of 292 pages

See the first 16 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    - 1 - CHAPTER 1. INTRODUCTION 1.1 (a) This is a mass production example. Standard windows are manufactured by special purpose equipment arranged according to the production process. The flow of material on the production line follows the routing of the product and each worker on the line performs the same operation on each unit of the product. (b) This is a batch-oriented example. The one time order of 150 window assemblies is a batch that requires a special set up of the machines. In addition, the workers on the line will be performing specific operations in accordance with the unique design characteristics of the window subassemblies. (c) This is a project-oriented example. The project is to design and build a facility that can supply 1,000 window assemblies per month throughout the year at minimum cost while meeting advertised quality standards. 1.2 Stage I Define location, food types, style (project) Stage II Define goals and their relative importance: size, customer types, prices, opening hours, number of workers, cost, opening date (project) Stage III Define performance measures: cooking time, serving time, cleaning time (project) Stage IV a – Develop schedule b – Develop budget c – Design and plan Cooking process Serving process Cleaning process Design restaurant interior (division into kitchen area, serving area, etc.) Furniture and décor Decide on equipment Decide on types of supplies and quantities Plan advertisement These are all part of a project Stage V Integrate into project plan (project) Stage VI Develop implementation plan: find location, begin interior construction; hire staff and train them; acquire equipment, furniture, décor; contract suppliers; develop advertising strategy (project)

  2. Page 2
  3. Page 3
    Read page 3 as text

    Chapter 1. Introduction 2 Stage VII Monitor and control cost, schedule and technical process (project) Stage VIII Run trials and evaluate (batch production) Stage IX Open and run on daily basis (mass production) 1.3 Products: 1. Building blocks – needed by builders Alternatives : Wood, stone, metal. 2. Window drapes – privacy, blocks light Alternatives : blinds, shutters, tinted glass. Services: 1. Express mail – communications A lternatives : messengers, fax, email 2. Buses – travel Alternatives : private car, taxi, train, airplane 1.4 Assumptions 1) The delivery company and driver have experience, both in delivery and predicting arrival times. 2) There are 2 drivers. 3) The truck will travel at an average speed of 41.7 mph MI/48 hr, including rest stops. 4) All roads from the origin and house are in good condition. 5 The truck will not encounter any traffic jams. 6) The truck is in good condition, and no mechanical failures will occur. 7) The truck will not be involved in an accident, etc. If all of the above assumptions are true, then the truck will arrive on time. If assumption 2 is false, then the arrival time will probably double. If any of assumptions 3-7 are false, then there is no way to predict the arrival time. If the shipment was by rail the assumptions are: a) The material will be loaded on time. b) The train will travel by continuously. c) The truck traveling from the unloading point to the house will travel continuously. Generally, the rail option increases the probability of on time arrival.

  4. Page 4
    Read page 4 as text

    Chapter 1. Introduction 3 1.5 There are 3 factors affecting price: 1) Cost of materials 2) Cost of equipment 3) Cost manual work I. If the house plans are available, then the cost of materials and equipment are known. The only uncertainty is manual work time. If the plumber is unable to predict this, then he lacks experience. Do not accept his proposal. II. If the plans are not available then the plumber cannot predict the material, equipment and manual work time needed. In this case a $2000 reserve for unseen expenses is reasonable. 1.6 The following data were collected in 10 trials. Trail, n Driving time (min), t 1 7 2 9 3 15 4 8 5 9 6 7 7 10 8 11 9 9 10 7 Mean,  = 9.2 Standard deviation,  = 2.44 Coefficient of variation,  /  = 0.215 1.7 (a) Technological – availability of information; scheduling – time required to collect and process the information. (b) Technological – availability of information and equipment, scheduling, required activities and the duration of activities; cost – equipment, labor and transportation. (c) Scheduling – traffic jams, mechanical problems, driving conditions. (d) Cost – price not predictable; technological – quality and performances of the item.

  5. Page 5
    Read page 5 as text

    Chapter 1. Introduction 4 1.8 School of Business Administration The projects in this structure are research-oriented and undertaken by teams of professors from the various departments. The product is knowledge and the publication of research results. There are several customers including the students, the local and national business community, and funding agencies. 1.9 The functional structure is identical to the structure depicted in the solution to Exercise 1.8 for the different departments in a business school. 1.10 Job description  Appropriate education  Previous management experience  Communication and negotiation skills for dealing with the community, local authorities, contractors, suppliers, experts, and workers  A member of the community (desirably a parent) Criteria  Relevant college degree  5 years of experience in a related area  A good interview Candidate 1 Mechanical engineer 3 years of experience in mechanical engineering Member of the community No children Hobbies: Basketball, hiking, stamp collecting Organizational behavior Mathemati cs Computer science Management Marketing Accounting Finance Statistics Operations research

  6. Page 6
    Read page 6 as text

    Chapter 1. Introduction 5 Candidate 2 Aeronautical engineer 7 years of experience managing in various computer-oriented small projects involving software development A parent Member of the community Hobbies: gardening, building model planes Candidate 3 Industrial engineer 5 years experience in the car industry managing R&D projects A parent Not a member of the community Hobbies: skiing, music Evaluation of candidates: Candidate 1: Besides being a member of the community, this cand idate’s background does not match the rest of the job description. This candidate is not chosen. Candidate 2: Although this candidate is qualified in most areas, the weak point is education and project management experience. The types of projects this candidate participated in did not involve communication negotiation and contracting skills. This candidate is not chosen. Candidate 3: This candidate is not a member of the community and has not been involved in similar project. But his communication, negotiation and contracting skills will enable him to manage the experts needed and to carry out the project successfully. This candidate seems to be the best of the three. 1.11 The work content: Preparation of a thesis on the success of project management techniques including: a. literature review (about 100 articles and 20 books) and preparation of research hypothesis (about 10) b. preparation of a questionnaire (50 questions) based on hypothesis c. interviews (200 managers in all 50 states) d. statistical analysis of results (hypothesis testing ANOVA) e. presentation of results to the customer (3 presentations) f. preparation of a mailing questionnaire (to 100 companies) g. distribution of mailing questionnaire (to 100 companies) h. follow up phone calls (about 200 calls)

  7. Page 7
    Read page 7 as text

    Chapter 1. Introduction 6 i. analysis of results k. write up of thesis (about 100 typed pages, 30 tables and 20 figures) l. revisions (3 major revisions, 10 minor revisions) m. final production Relevant criteria (and performance measure) a. Ph.D degree in a related area (grade achieved) b. at least 5 publications in related areas (number of publications) c. good connections with industry (number of organization contacts) d. high grades in English, writing (grades) e. high grades in statistics (grades) f. good knowledge of MS Word or a similar word processor (subjective evaluation) g. living close by (distance) h. has a computer and a laser printer at home (1 for both, 0.5 for computer only, 0 for none) i. successfully completed other theses in the past (number of previous theses) Required schedule Task Start time from project initiation, (months) End time from project start, (months) a 0 1 b 1 2 c 2 5 d 3 6 e 4 6 f 5 7 g 6 8 h 7 9 i 8 10 j 9 11 k 10 11 l 10 12 m 11 12

  8. Page 8
    Read page 8 as text

    Chapter 1. Introduction 7 1.12 The best proposal will be selected based on a subjective evaluation of each candidate with respect to the relevant criteria and subjective weight given to each criteria. Each criteria will be measured on a scale from 0 (poor) to 5 (excellent). The weighted sum of scores will be the aggregate measure used for selection: Candidate Criteria Weight 1 2 3 a 10% 3 4 3 b 5% 4 2 2 c 15% 4 4 2 d 15% 4 2 2 e 20% 3 5 3 f 5% 2 2 4 g 20% 1 4 3 h 5% 2 4 4 i 5% 4 2 2 100% Weighted score = 27 29 25 Best candidate is number 2. 1.13 Conceptual design phase (project initiation selection and definition) Design a project Estimating the life cycle cost Getting customer’s approval for the design Advanced development (analysis of activities) Developing the network Advanced development (project scheduling) Development of a calendar Estimating activity duration Advanced development (project budgeting) Development of a budget Detailed design phase (project organization) Selecting participating organizations Developing the WBS Establishing the milestones Production phase (project execution and control) Execution of activities Managing the configuration Monitoring actual performance Development of corrective plans Termination phase Recommending improvement steps

  9. Page 9
    Read page 9 as text

    Chapter 1. Introduction 8 1.14 (a) 1. Learning car mechanics in order to be able to repair my car. 2. Bicycling to school (b) 1. Building my own house 2. Repairing my old air conditioner (c) 1. Getting a pilot's license 2. Buying a new car (d) 1. Buying an apartment 2. Having a child 1.15 1. Development of a new robotic lab in the engineering school – this project is in the production phase. Most of the equipment has been purchased and installed, although some is still on order. 2. Moving to a new house – this project is at the conceptual design phase. The decision to move was made but the new house has yet to be selected. 1.16 NASA's Moon Landing Project Risks ( cost ): Because many new and specialized devices were used, there were not a large number of suppliers to choose from. Also, because some of the technology was being developed at the time, it was impossible to pin down all the cost –– the devices, components and subassemblies had not yet been made. Technology : Much of the equipment was being developed and there had been relatively few manned space flights, and even fewer where the astronauts ventured outside the vehicle. Also, technology was not shared between the U.S. and the U.S.S.R. further reducing the knowledge base. Schedule : Early in the program, the schedule was dependent on the adequate development of technology to enable a successful launch, landing, and re-entry of the spacecraft. After reaching a satisfactory technological level, a suitable window for launch was dependent on the position of the moon and the weather at Cape Canaveral. From the inception of the program, there was also an urgency brought on by political pressure to achieve these goals before the Soviets. Resources : NASA had to choose how to divide its fixed budget to develop the technology for this mission as opposed to others, such as the development of a "space plane," which was shelved, only to be reincarnated years later as the space shuttle. Also, materials and systems, such as boasters, capsules, lunar landers, and fuel had to be design ed , built, and paid for all within the available budget.

  10. Page 10
    Read page 10 as text

    Chapter 1. Introduction 9 Uncertainties : NASA, as a government agency, has to have annual approval of its budget by Congress -- a political body whose membership is constantly changing. Questions such as: Would the technologies work? Would the weather cooperate? Would the astronauts perform adequately? all lend an element of uncertainty to the program. Other projects: 1. The logistics operation before Iraqi Freedom – the objective of this project was to transfer the required USA forces to Saudi Arabia before Desert Storm. This goal was successfully achieved. 2. The election campaign of George Bush – the objective of this project was to get Mr. Bush elected as the US president; the goal was successfully accomplished in 2000 and 2004. 1.17 Some examples are: 1. The “Spruce Goose” – In 1942, industrialist Henry Kaizer and the pilot and innovator Howard Hughes won a government contract for a fleet of giant flying boats to be built out of wood. World War II ended and the contract expired before the prototype was completed. Hughes continued with his own money and in November 1947, the $28 million plane flew about a mile above Long Beach Harbor on its first and final voyage. This project failed because the end of the war marked the end of the flying boat era. In addition, advances in metallurgy and engine performance superceded the need for light-weight wood aircraft. 2. In 1980, Israel Aircraft Industries began to develop the Lavi fighter. This project was mostly financed by the U.S. government, and , by 1984 , when the first prototype was ready, the Israeli government halted the project primarily for political reasons. The U.S. government withdrew financing because it felt that the Lavi would eat into the business of U.S. companies such as Boeing and Lockheed. The Israeli government, an annual recipient of U.S. foreign aid, was persuaded not to continue on its own. 3. Ballistic missile defense or “Star Wars” – This huge and costly project was initiated by Ronald Reagan in the late 1980s with the goal of protecting the U.S. from a nuclear attack by the former Soviet Union. The underlying technology was enormously complex, requiring lasers to be stationed on Earth-orbiting satellites and to be controlled through a sprawling computerized network of ground stations. The project was halted in the early 1990s when the U.S. congress failed to allocate funds for further development. Several reasons contributed to that decision including the collapse of the Soviet Union, widespread protests from respected experts who saw little hope of the system working, pressure to spend the funds elsewhere, and the failure of initial tests to achieve even a modicum of success. Nevertheless, in the early 2000s, President Bush reinitiated the project hoping to capitalize on new technologies and a favorable political mood in the congress.

  11. Page 11
    Read page 11 as text

    - 1 - CHAPTER 2. PROCESS APPROACH TO PROJECT MANAGEMENT 2.1 The project selected for this discussion is the Darwin Alice Springs Railway project. (a) The major stakeholders are: 1. The citizens of Australia 2. The Northern Territory government 3. The South Australian governments 4. The government of Australia (the commonwealth government) 5. The Australasia railway corporation (established in 1997 by the Northern Territory and South Australian governments) 6. Contractors, subcontractors and suppliers 7. Workers on the project (b) This was an external project performed for Australia (a joint venture between the northern Territory and the South Australian government) by the Australasian railway corporation. (c) The most important resources used in the project were human resources, machines, measuring devices, and some raw materials. 1. Human resources. Because of the complex nature of the project, an exceptional need existed for licensed individuals and other experts. Although there was no lack of labor in the area, highly motivated and capable workers can make the difference between project success and failure. 2. Raw material needed for the project (e.g., 146,000 tons of steel rail, 2 million concrete sleepers, 2.8 million tons of ballast, 100,000 cubic meters of pre-stressed concrete and much more.) 3. Special machines. The machines played an important role because the sleepers and the steel rails were too heavy to be carried by men. The machines are the "common worker" here and workers only operate them. 4. Accurate measuring devices. If a line were one degree off from its planned bearings its terminal point would be 2.5 km inland with respect to the port of Darwin, the desired terminal point, or 2.5 km out at sea. (d) The needs of the stakeholders: 1. The citizens of Australia 2. The Northern Territory government 3. The South Australian governments 4. The government of Australia (the commonwealth government)

  12. Page 12
    Read page 12 as text

    Chapter 2. Process Approach to Project Management 2 The Northern Territory economy is small. It relies on world demand for mining, farming , and tourism (though domestic tourism is more important than international). But the Northern Territory also has a solid base of defense and government employment, with the defense presence notably built up in the past decade. Due to its size and its exposure to ex port markets, the Northern Territory ' s economic performance is volatile, but , on average , the past decade has seen it outperform the wider Australian economy in both output and job growth. That strong performance was led by mining and related activities (including some offshore), the defense build up, and the fact the Northern Territory is at an earlier stage of development, and so benefits from extra capital works (such as the Darwin-Alice railway). Recent Northern Territory economic growth has been modest, with the Defense build up moderating and tourism stagnating. The resultant slower population growth has meant little housing construction for three years. Nevertheless, other projects are expected to pick up the commercial construction slack, the global economy is recovering, and so too is the outlook for tourism. The railway is expected to reduce the transport costs for goods from the inlands to the rapidly growing markets of East Asia and bring tourism into the inland. It is the only rail connection between South Australia and the north. Given the fact that ground transportation is less expensive than air and given the rapidly growing markets in the north, for Australia this railway has to become a success story, at least from an economic point of view. 1. The Australasian railway corporation (established in 1997 by the Northern Territory and South Australian Governments) holds exclusive rights to operate the entire line for the next 50 years. 2. Contractors, subcontractors and suppliers. These are for profit firms for which the project is a source of income and expertise. 3. Workers on the project. The workers are looking for good jobs that pay well and will allow them to develop their skills. (e) The alternatives for the project are: 1. The road system which is already built and functional ; 2. Using the sea as a transportation platform (combined with the road system for inlanders) ; 3. Using the airways, again combined with roads. All three are cheaper in the short run – mainly because they already exist – but in the long run each has disadvantages that limit the volume and weight of goods that can be transported. Slower transportation rates ultimately mean higher costs. Another alternative is to design a high-speed railway system that would increase throughput but be far more expensive to build and maintain. In the view of the

  13. Page 13
    Read page 13 as text

    Chapter 2. Process Approach to Project Management 3 planners, however, the conventional railway system is expected to satisfactorily meet the needs of the region (mainly industrial needs). (f) The northern territory government ordered a comparison between the road option and the rail option and obtained the following results.  For trucks: i. The average truck operating cost within the corridor is estimated at 3.26 cents/ntk (net tonnes-kilometer). ii. The average truck operating cost for operations outside of the corridor is estimated at 3.70 cents/ntk.  For rail: i. rail operating costs were estimated using the Booz·Allen rail cost model at 1.82 cents/ntk for the operations within the corridor. ii. 2.75 cents/ntk for operations outside of the corridor. In both cases, the operating costs are projected to decline by 1.5% per annum for 30 years due to (1) improvements related to economies of scale and future productivity gains, (2) changes in the fleet mix leading to increased capacity and improvements in fuel efficiency, and (3) better technology leading to better maintenance of the road vehicles, which include the following truck types: articulated 6-Axle, B-double, double road train, and triple road train. In addition, the following savings in externalities are expected:  Savings in road infrastructure costs is 0.770 cents/ntk for trucks operating within the Adelaide to Alice Springs corridor and 0.901 cents/ntk for trucks operating outside the corridor. The estimates are based on the Travers Morgan report.  Savings in road accidents are estimated to be 0.183 cents/ntk for trucks operating within the corridor and 0.319 cents/ntk for trucks operating outside the corridor. These values were derived from the latest ARRB Accident costs for articulated vehicles.  Savings from the reduction in greenhouse gas emissions is based on work by VTES (1994) on CO2 vehicle emissions and Moffet (1991) cost estimates. The costs related to greenhouse gases for this analysis are 0.05 cents/ntk for rail and 0.10 cents/ntk for road. Based on the analysis conducted during the study, the rationale for the selected alternative is as follows.  The port connected to this rail is the closest one to the designated markets. This gives it an important role in Australian economy especially in the "global era" and in light of mining activities, which support the local economy.  The existence of the line will play a key role in unlocking the development potential of the Northern Territory’s largely untappe d mineral reserves.  The project makes Darwin a gate for tourism and the rail will make it easier to travel within Australia. Given the vast distances, rail is a better and more

  14. Page 14
    Read page 14 as text

    Chapter 2. Process Approach to Project Management 4 comfortable way of travel than road or air for both people. It is also more economical for goods.  For the inland cities that will gain a gate towards the sea, the project is definitely a big boost; for the rail company it is a "win-win" situation.  In the short run this may seem to be an expensive project , but according to the analysis , it will pay for itself in a few years and remain a major asset for the state and citizens. The results of a 50-year economic evaluation using a discount rate of 5% are summarized in the table below. Results of Economic Evaluation Project case ($M) Measure 926 Capital costs (present value) 1,737 Benefits (present value) 811 Net present value 0.88 NPV/capital costs 9.2 Internal rate of return (%) 1.88 Benefit / cost With an initial capital cost of $926 million (PV), the project yields a net benefit of $811 million, giving a benefit-to-cost ratio of 1.88 and an internal rate of return of 9.2%. The table below provides a breakdown of the various sources of project benefits. Source of project benefits Project case ($M) % Operating costs improvements 913 53 Accident costs avoided 181 10 Avoidance of intermodal transfer costs 15 1 Road infrastructure cost savings 574 33 Greenhouse gas savings 54 3 Total 1,737 100 The primary source of benefits is the savings in operational cost for tonnage diverted to the new rail link. The reduction in road infrastructure costs due to the diversion of freight from to rail is the next major benefit source. Sensitivity Analysis : A number of sensitivity tests were conducted and the results shown in the following able.

  15. Page 15
    Read page 15 as text

    Chapter 2. Process Approach to Project Management 5 Sensitivity measures NPV ($M) NPV/C B/C IRR Baseline evaluation 811 0.88 1.88 9.2% Project rail operating costs: +10% 713 0.77 1.77 8.8% Project rail operating Costs: – 0% 910 0.98 1.98 9.7% Rail task: +10% 908 0.98 1.98 9.7% Rail task: – 10% 598 0.65 1.65 8.3% Rail task: – 20% 432 0.47 1.47 7.5% Project construction costs: +10% 718 0.71 1.71 8.5% Project construction costs: – 10% 903 1.08 2.08 10.1% Road operating costs: 0% annual decline 1425 1.54 2.54 11.2% Road operating costs: – 3% annual decline 396 0.43 1.43 7.5% 7% discount rate 310 0.35 1.35 9.2% 3% discount rate 1714 1.78 2.78 9.2% The results show that the NPV ranges from $310 million to $1,714 million with the benefit-to-cost ratio (B/C) ranging from 1.35 to 2.78. Moreover, the internal rate of return (IRR) ranges from 7.5% to 11.2%, indicating that under all scenarios investigated the NPV of the project is positive at the selected discount rate of 5%. (g) The risks of this project are of two types:  Risks that may hamper the completion of the project  Risks that might make the project to “a white elephant”: (h) The following list of risks is arranged by severity and phase.  Pre-construction 1. Inability to acquire the lands needed for the rail as planned. 2. Lack of cash. 3. Design and Over-investment – building an “overqualified” line for a faster train with the entire infrastructure involved. 4. Subcontractor failure (bankruptcy). 5. Insufficient raw material (mainly sleepers, steel rail and ballast) 6. Opposition of the public due to environmental damage.  Post-construction. While the Northwest Territory is projected to be a fast growing economy in comparison to the rest of Australia, its small size and resource strengths also point to it being a more volatile one. As a consequence, its past may not accurately reflect its future. Additional risks include:

  16. Page 16
    Read page 16 as text

    Chapter 2. Process Approach to Project Management 6 7. High maintenance costs. 8. The $A rising beyond current expectations. This would have the effect of making some projects uncompetitive, putting at risk the strong investment outlook, and weakening the outlook for tourism and education exports. 9. Darwin ' s proximity to potentially unstable Asian trouble spots of terrorist activities. This has diverted tourists from the Asia-Pacific and may continue to do so. 10. The global recovery stuttering. While current signs are good, if global demand were to stagnate again the effect on the NT‘s resources and tourism sectors would be strongly negative. 11. “Acts of God” – cyclones (and other natural phenomena) may be a higher risk for Darwin than for other Australian capital cities. (i) The following steps were taken to mitigate the risks.  Land and environmental risks. While the Austral Asia Railway Corporation coordinated the tender process and negotiations, the Northern Territory government had primary responsibility for negotiating with aboriginal Land Councils and pastoralist regarding acquisition of the corridor (with compensation payments of $A 22 million). Environmental and heritage issues had to be addressed and fencing the corridor was required. A draft environmental impact statement was released in 1983 and updated with a new environmental management plan in 1997. At that time, the project received environmental approval from the Northern Territory and from the commonwealth governments. The Northern Territory obtained Sacred Sites avoidance certificates in accordance with the Northern Territory Aboriginal Sacred Sites Act for an area of extending 200 meters on either side of the railway centre line and for the identified ballast sites outside the corridor. Various reports were commissioned to determine the likely impact of the railway on sites of archaeological and historical significance. The Aboriginal Areas Protection Authority has pegged all Aboriginal sites of significance and good working relationship between the Authority, Adrail and Aboriginal organizations is ensuring close cooperation throughout the project. The area of the Gouldian Finch Wet Season Feeding Habitat affected by construction of the railway has been reestablished using plants from a nursery set up prior to the construction. Adrail, with assistance from Greening Australia and the Kybrook Farm community at Pine Creek, have completed the required rehabilitation on the site at Yinberrie Hills. The railway will have no impact on the heritage values of any declared heritage site; however, certificates have been obtained where the railway passes close to three declared heritage sites on the route of the old North Australian Railway line.

276 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Economics study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.