Sharon Construction Company Has Won the Bid Case Study

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Sharon Construction company has won the bid to build a new 20,000 seat stadium, but several issues have arisen which are of concern to management of the project. Since the dual goals of any business endeavor are to both make money and increase the reputation of the firm, complications incurred during a project are to be avoided if possible. Since a best case scenario is not often achieved due to unforeseen difficulties, it is the purpose of management to evaluate all possible negative consequences that exist for any project, and to mitigate such occurrences to the largest possible extent.

The Sharon Construction firm has determined several occurrences which could possibly hinder the contracted completion timeline of the project. Since it is necessary to hire unionized labor, a strike is a real threat. Also, since concrete pours need to be completed at a certain temperature, it is necessary to complete these prior to any extreme winter activity. With these, and other, issues in mind, five contingency plans have been devised by the firm's managers to ensure successful completion of the project with as little delay and extra cost as possible. It is the job of this consulting firm to determine the most appropriate plan of action given the probability of a time loss which could result in a significant financial penalty if the project is completed late.

Possible Problems

A host of issues present themselves, but many can be mediated when they arise. However, a few of the issues need to be taken into immediate consideration. Hiring labor for a project of this magnitude requires that skilled unionized workers be used. This in and of itself is not an issue because these workers are both well trained and can be expected to perform well in their given field. Unfortunately, the contracts of all unionized employees must periodically be bargained. This fact could seriously impact the completion of this project if the new contract is not agreed to before the expiration of current labor agreements. If the new contracts are not in place by November 30th, the various union trades will strike until a new agreement is reached. This could mean a delay of eight to twelve weeks. A second issue involves the possibility that the weather will negatively impact construction. It has recently been forecast that December could be an extremely cold month and this could affect whether tons of concrete will set properly.

The preceding problems require solutions, but they are not the major issues which face Sharon Construction. The continued viability of any business relies on two primary factors. First, the reputation a company establishes with completed projects is contingent on the timeliness, professionalism and excellence with which it does the work. The reputation of a construction firm has to be above reproach due to the competition which exists within the industry. The second issue is the most important and will be discussed in the next section.

Major Problem

The contract that was signed detailed that the work on the stadium would be completed in one year. Construction will begin on February 15th, and so it must be completed prior to that date one year hence. If the work is not completed by that date, there will be a $15,000 per week penalty assessed for each week that the project is delayed. These facts make the major concern monetary in nature. All of the other problems that could possibly occur are in some way tied to the issue of finishing the project in time to make sure that no penalty is incurred at the completion of the project.

It is possible that Sharon Construction could realize a net profit of approximately $300,000, but this cannot be guaranteed unless all precautions are taken. It is a fact that union workers must be employed in the effort; it is also a fact that the weather in December is not conducive to pouring concrete. Therefore, the proposal chosen as the best alternative must successfully mitigate any possible problems that could occur during the construction of the stadium which will significantly reduce its profitability.

Recommendations

Five solutions were proposed which would provide varying degrees of assurance that the project will be completed according to the agreed timeline of the project. If no problems occurred during the construction phase of the project, the stadium would be completed in 48 weeks which leaves a time buffer of four weeks. The chosen solution must include both the elements of timely completion and reduced additional cost.

After careful consideration of all alternatives suggested by the team managers, proposal number one was selected as the best possible means of completing the task. All of the alternatives were weighed using all possible data including several Gantt diagrams of the construction timeline and cost determinations based on the best data available.

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All five proposals were examined with the primary problem in mind.

The first proposal provided the lowest overall penalty and extra construction cost among the five. The separation between the five proposals is examined in detail in the next section.

Using two Gantt diagrams (Appendices A and B), the timeline of the project was examined to determine what the benefits of the first proposal were. If no problems occurred during construction, the entire project can be completed in just 48 weeks beginning Monday February 15th and concluding Sunday January 16th (Appendix A). Of course, this includes shift work which allows construction to occur seven days a week with union mandated off days and holidays observed. Unfortunately, because of the issues mentioned previously this cannot be guaranteed. With the impending end of the labor agreement and weather issues, a perfect schedule would be difficult to maintain. Appendix B shows the timeline as it will occur if proposal one is utilized. The gallery supports are a crucial step that be used to ensure that one of the two issues is completely mitigated. By pouring the seat gallery supports in six weeks vs. twelve, all of the concrete work will be completed by 11/14 (Appendix B). Therefore, there will be no additional cost required to heat the concrete.

The proposal was also examined as to the issue of the question of a possible strike. This issue had to be determined using a probability analysis based on the estimates given by the human resources manager. The probability of an eight-week strike is 35% and that of a twelve week strike is 15%. Given the remote possibility of a twelve week strike it was discounted. This is due to the fact that no matter what proposal was used, a twelve week strike put the timeline beyond the February 14th finish date. However, even using the twelve week strike timeline, proposal one allowed the project to be completed with just a two-week delay. Figuring in an eight-week strike, which has a much higher probability, the project will still be completed two weeks ahead of schedule. It was found that by employing proposal one both problems were solved for the $20,000 cost, whereas none of the other proposals guaranteed such a low cost solution.

Therefore, it is recommended that Sharon Construction expedite pouring the seat gallery supports which will reduce the time required to finish all concrete work and help maintain the timeline if a strike should occur. The next section will be a detailed look at the differences between the proposals.

Discussion and Analysis

In considering the first proposal, the consultant realized that both laying the turf and painting the stadium remain one week from total completion. However, there is very little work left to complete. This means that either extra help would have to be hired or non-union labor could be used for the final week's work. But this poses a problem when union work is needed in the future. So even if the firm has to maintain its relationship with the unionized labor, the project only has a 15% chance of being delayed by 12 weeks which would put the company 2 weeks over the allotted time for a $30,000 penalty. There is a 35% chance that the project would be delayed for 8 weeks by the strike which would mean that the project would still be completed two weeks ahead of time (Appendix B). There is also a 50% chance that there will be no delays due to labor which would mean that the project would finish ten weeks ahead of time. Also, the fact that it may be a cold December only affects the pouring of the concrete. With the schedule suggested here, all of the poring would be completed by 11/14 (Appendix B) which means that the December weather would not affect it.

To completely examine which proposal was give the firm the best alternative, all of the proposals had to be examined. In examining proposal two, it was realized that the concrete pour is the primary issue to make sure that the firm does not incur the possible penalty cost, and this factor is addressed with the first proposal.….....

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