SUPPLEMENTARY EXAMINATION

PROGRAMME Postgraduate Diploma in Project Management

MODULE Project Scope and Time Management

INTAKE July 2014

DATE 08 January 2015

TIME 09h00 – 12h00

DURATION 3 hours

TOTAL MARKS 100

INSTRUCTIONS TO THE CANDIDATE

1. Questions must be attempted in the answer book provided.

2. All queries should be directed to the invigilator; do not communicate or attempt to communicate with any
other candidate.
3. You have THREE HOURS to complete this paper. You are not allowed to leave the examination room within
the first hour and in the last 15 minutes of this examination.
4. This is a CLOSED BOOK examination.
5. Read ALL instructions carefully.

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SECTION A [40 MARKS]
Answer ALL questions in this section.

Read the following case study and answer ALL the questions that follow.

Read the following case study and answer the questions that follow:
CASE STUDY: Cory Electric
“Frankly speaking, Jeff, I didn’t think we would stand a chance in winning this $20 million program. I was really surprised
when they said that they’d like to accept our bid and begin negotiations. As Chief contract administrator, you will head
up the negotiation team, “remarked Gus Bell, vice president and general manager of Cory Electric. “You have two
weeks to prepare your data and line up your team. I want to see you when you’re ready to go”

Jeff Stokes was chief contract negotiator for Cory Electric, a $250- million-a year electrical components manufacturer
serving virtually every major U.S industry. Cory Electric had a well-established matrix structure that had withstood fifteen
years of testing. Job casting standards were well established, but did include some “fat” upon the discretion of the
functional manager.

Two weeks later, Jeff met with Gus Bell to discuss the negotiation process.

Gus Bell: “Have you selected an appropriate team? You had better make sure that you’re covered on all sides”
Jeff: “There will be four, plus myself, at the negotiating table; the programme manager, the chief engineer who
developed the engineering labour packages; the chief manufacturing engineer who developed the production labour
package; and a pricing specialist who has been on the proposal since the kick-off meeting. We have a strong team and
should be able to handle any questions”

Gus Bell: “Okay, I’II take your word for it. I have my own checklist for contract negotiations. I want you to come back
with a guaranteed fee of $1.6 million for our stockholders. Have you worked out the possible situations based on the
negotiated costs?”

Jeff: “Yes! Our minimum position is $20 million plus an 8 percent profit. Of course, this profit percentage will vary
depending on the negotiated cost. We can bid the programme at $15 million cost; that’s $5 million below our target cost
and still book a 1.6 million profit by overrunning the cost-plus-fee contract. Here is a list of the possible cases. See
Exhibit one below.

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Jeff: “I’ve read over all terms and conditions, and so have all the project office personnel as well as the key functional
managers. The only major item is that the customer wants us to qualify some few vendors as sources for raw material
procurement. We have included in the package the cost of qualifying two new raw material suppliers”

Gus Bell: “Where are the weak points in our proposal? I’m sure we have some”

Jeff: “Last month, the customer sent in a finding team to go over all of our labour justifications. The impression that I get
from our people is that we’re covered all the way round. The only major problem might be where we’ll be performing on
our learning curve. We put into the proposal 45 percent learning curve efficiency. The customer has indicated that we
should be up around 50 to 55 percent efficiency based on our previous contracts with him. Unfortunately, those
contracts the customer referred to were four years old. Several of the employees who worked on those programs have
left the company. Others are assigned to on-going projects here at Cory. I estimate that we could put together about 10
percent of people we used previously. That learning curve percentage will be a big point for disagreements. We finished
off the previous programs with the customer at 35 percent learning curve position. I don’t see how they can expect us to
be smarter, given these circumstances.”

Gus Bell: “If that’s the only weakness, then we’re in good shape. It sounds like we have a fool proof audit trail. That’s
good! What’s your negotiation sequence going to be?

Jeff: “I’d like to negotiate the bottom line only, but that’s a dream. We’ll probably negotiate the raw materials, the man-
hours and the learning curve, the overhead rate, and finally the profit percentage. Hopefully, we can do it in that order.”

Gus Bell: “Do you think that we’ll be able to negotiate a cost above our minimum position?”

Jeff: “Our proposal was $22.2 million. I don’t foresee any problem that will prevent us from coming out ahead of the
minimum position. The 5 percent change in learning curve efficiency amounts to approximately $ 1 million. We should
be well covered.

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“The first move will be up to them. I expect that they’ll come in with an offer of $ 18 to $19 million. Using the binary chop
procedure, that’ll give us our guaranteed minimum position.

Gus Bell: “Do you know the guys who you’ll be negotiating with?”

Jeff: “Yes, I’ve dealt with them before. The last time, the negotiations took three days. I think we both got what we
wanted. I expect this one to go just smoothly”

Gus Bell: “Okay, Jeff. I’m convinced we’re prepared for negotiations. Have a good trip”
The negotiations began at 9:00 A .M on Monday morning. The customer countered the original proposal of $22.2 million
with an offer of $15 million. After six solid hours of arguments, Jeff and his team adjourned. Jeff immediately called Gus
Bell at Cory Electric.

Jeff: “Their counteroffer to our bid is absurd. They’ve asked us to make a counteroffer to their offer. We can’t do that.
The instant we give them a counteroffer, we are in fact giving credibility to their absurd bid. Now, they’re claiming that, if
we don’t give them a counteroffer, then we’re not bargaining in good faith. I think we’re in trouble”

Gus Bell: “Has the customer done their homework to justify their bid?”

Jeff: “Yes, very well”. Tomorrow we’re going to discuss every element of the proposal, task by task. Unless something
drastically changes in their position within the next day or two, contract negotiations will probably take up to a month”

Gus Bell: “Perhaps this is one program that should be negotiated at the top levels of management. Find out if the
person that you’re negotiating with reports to a vice president and general manager, as you do. If not, break off contract
negotiations until the customer gives us someone at your level. We’ll negotiate this at my level, if necessary.”
Source: John Wiley & Sons Inc. (2006)

QUESTION 1 (20 Marks)

Analyse the various types of Gantt charts Gus bell and Jeff can use to schedule preparations for the above negotiation.

QUESTION 2 (20 Marks)

“I’d like to negotiate the bottom line only, but that’s a dream. We’ll probably negotiate the raw materials, the man-hours
and the learning curve, the overhead rate, and finally the profit percentage. Hopefully, we can do it in that order.”

If so much variability (uncertainty) was on man-hours, discuss an appropriate time estimating approach.

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SECTION B [60 MARKS]
Answer ANY THREE (3) questions in this section.

QUESTION 3 (20 Marks)

Consider the following given information from county engineers design department and answer the questions that
follow:

Activity Code Activity description Activity Time in days

A Application Approval 5
B Occupancy 35
C Commission Approval 10
D Wait for construction 170
E Traffic Study 10
F Construction Plans 15
G Staff report 15
H Service Availability 5

3.1 Create a dependence table for the above activities. Motivate your answer. (10 marks)

3.2 Draw a network diagram on the basis of your established dependencies. (10 marks)

QUESTION 4 (20 Marks)

Discuss the advantages and disadvantages of activity on node (AON) network diagrams.

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QUESTION 5 (20 Marks)

Consider the following information given in the table below:

Activity Description Predecessor a opt m ml b pess

1 Codify accounts - 16 19 28
2 File articles of unification - 30 30 30
3 Unify price and credit policy - 60 72 90
4 Unify personnel policies - 18 27 30
5 Unify data processing 1 17 29 47
6 Train accounting staff 1 4 7 10
7 Pilot run data processing 5 12 15 18
8 Calculate P & L and balance 6,7 6 12 24
sheet
9 Transfer real property 2 18 27 30
10 Train sales force 3 20 35 50
11 Negotiate with unions 4 40 55 100
12 Determine capital needs 8 11 20 29
13 Explain personnel policies 11 14 23 26
14 Secure line credit 9,12 13 16 19
15 End 10, 12, 13, 14 0 0 0

5.1 Compute the expected time and draw the AON network diagram. Arrows should not cross each other.
(6 marks)

5.2 Compute the ES, EF, LS, LF and total float for each activity. (14 marks)

QUESTION 6 (20 Marks)

6.1 Critically discuss FIVE (5) approaches to creating the work breakdown structure. (10 marks)

6.2 From 6.1, explain an example of each approach from your company. (10 marks)

END OF PAPER

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 DATA SHEET

a = optimistic time
m = most likely time
b = pessimistic time
t = expected time
ES = earliest start time
EF = earliest finish time
LS = latest start time
LF = latest finish time
Z = the number of standard deviations the due date or target lies from the mean or expected date.

1. ES = Max {EF of all immediate predecessors}

2. EF = ES + activity time

3. LF = Min {LS of all immediate following activities}

4. LS = LF - Activity time

5. Slack = LS – ES or LF – EF

6. t = (a + 4m +b)/6

7. Variance of activity completion time = [(b- a)/6]2

8. Project variance = Sum of variances of activities on critical path

9. Project standard deviation = square root of project variance

10. Z = (due date – expected date of completion)/project standard deviation.

11. Probability = Normal Table value for the corresponding Z value.

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