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Oil Well Cable Company

Essay by   •  February 2, 2014  •  Case Study  •  1,911 Words (8 Pages)  •  3,528 Views

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ASSIGNMENT

PROJECT FEASIBILITY

PAYTON CORPORATION

REPORT

The statement of work specified that the project must be completed within ninety days after go ahead, and that the contract would be at fixed cost and fee. The majority of the work would be done by the development lab based on the estimated average cost of $19.00 per hour (Unburdened) as specified by government regulations. Payton won the contract for a total package (cost plus fee) of $305,000. After the first weekly labour report was analysed, it became evident that the development lab was spending $28.50 per hour. From the dialogue between the project manager and the Lab manager, the following questions and answers highlights the current status of the project

Question 1. What is the basis for the problem?

PROJECT PLAN AND PROPOSAL

The crisis facing Payton Corporation stems from the development of project plan and proposal. The project manager did not scope the project properly before submitting the proposal to the stakeholders who in this case is the government. During the development stages of the project plan and proposal; it is obvious that certain information regarding the lab manager's estimating procedures based on historical standards; and the pricing department's conversion system of hours to dollars based on department averages, were not included in drafting the project proposal. Further more, the project manager did not evaluate the potentials of the corporation's work force, as a result of this, he failed to put into consideration the availability of both low salaried staff and those on high learning curves before developing the project plan. This would have had a big impact on costing the project and preventing the hourly rate increment.

COMMUNICATION

From the conversation between the project manager and the Lab manager, it is clear that both the development lab and Pricing department were not made aware of the details of the Statement Of Work (S.O.W) or the Project Charter which establishes the basis of resource allocation, spending plan (S - curves), resource requirements and manloading etc. The lab manager's estimates were based on historical standards, the Pricing department converts the hours based on department averages non of which is in accordance with the approved project budget. As a result of lack of effective communication between the departments and the project manager, it seems that the departments were working on a set standards which are contrary to the stipulations of the project Charter. In other words, the departments and the project manager were not working in agreement.

'' It is important to work out specific agreement with all key contributors and their superiors on the task to be performed and the associated budget and schedules'' - Project Management, A systems approach to planning, scheduling and controlling - Harold Kerzner, Ph.d, Page 153.

Another major communication problem lies with the Lab manager. The statement of work specifies that the project must be completed within the time frame of ninety days (90) after go ahead and also stated clearly that the contract would be at fixed cost; with estimated cost based on the average of $19.00 per hour. From his understanding, the project deadline is sixty days (60) and instead of hiring low salaried staff (at $19.00 per hour) to work in the permissible time frame of ninety days (90), he went ahead to hire people high on the learning curve at a higher rate of $ 28.50 per hour to complete the job in a shorter time frame of sixty days (60).

Secondly, if the Lab manager is aware that submitting labour justification for all work as part of the proposal, how come he doesn't know that the average cost of the entire department is $19.00 per hour? Clearly, there is a break down of communication between the project manager and the Lab manager. However, this could also be a case of misinformation which shows the lack of effective communication between the two levels of command.

Harold Kerzner on effective communications

Effective project communications ensures that we get the right information to the right person at the right time and in a cost- effective manner. Proper communication is vital to the success of a project. Typical definitions of effective communication include:

* An exchange of information

* An act or instance of transmitting information

* A verbal or written message

* A technique for expressing ideas effectively

* A process by which meanings are exchanged between individuals through a common system of symbols

- Project Management, A systems approach to planning, scheduling and controlling - Harold Kerzner Ph.d Page 223

Other ref:

The communication system in project teams: Problem of transfer knowledge and information for the management of IT projects- By: Kisielnicki, Jerzy. Issues in information science and information technology 2011, vol. 8, p351-361, 11p.

PROJECT COSTING

Who is responsible for costing the project? From the dialogue, again it is known that the cost of job done in the development lab was estimated by the Lab manager and not the project manager. Therefore, the project proposal was drafted and developed without giving consideration to the cost of hiring staff who are capable of doing the job based on the average cost and deadline as specified in the government regulation. The overall budget and cost of the entire project is the responsibility of the project manager. He failed to utilise

Work breakdown Structure (WBS) as a tool to ascertain the actual cost of the project during the development stages of the proposal. Therefore, the project was inaccurately costed. It is virtually impossible to estimate the cost of a project by viewing the project as a whole which might have been the case here.

A project has to be reduced to smaller elements until the cost of each element can be determined. As the cost of each element is determined, the costs are added up to finally obtain a final cost for the whole project. Had this been done by the project manager before Payton submitted the proposal, the dilemma facing the Corporation in terms of average cost per hour would not have emerged. A typical example

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