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Sharon Construction Corporation

Source: Source Meredith & Mantel

Situation
Overhead cost of $500 per week for any delay after 48 weeks Penalty of $15,000 per week if project takes more than 52 weeks Possible Labour Strike in December Possible Cold December
Probability 0.50 0.35 0.15 Duration 0 weeks 8 weeks 12 weeks
Probability 0.333 0.667 E(x) Cost of Heating $500 per week $0 per week $167 per week

Alternatives
1. Expedite seat gallery supports 2. Expedite seat gallery supports and filling of the field 3. Expedite the roofing 4. Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution 5. Do nothing

Analysis of Baseline & Alternative No.5


 Do nothing (Tcp = 48+x weeks)

Analysis of Alternative No.1


Expedite pouring concrete for seat gallery supports ($20,000) (activity G from 12 to 6 weeks) (Time=42)

Analysis of Alternative No.2


Expedite pouring concrete for seat gallery supports ($20,000) (G from 12 to 6 weeks) and filling of the field ($10,000) (C from 14 to 9 weeks) (Time=42)

Analysis of Alternative No.3


Expedite the roofing ($9,000) (activity K from 8 to 2 weeks) (Time=48)

Analysis of Alternative No.4 with 8 Week Strike


  Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Time= 52)

Analysis of Alternative No.4 with 12 Week Strike


  Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Time=56)

Time Analysis
Project Duration Probability Strike Alternative Alternative Alternative Alternative Alternative Strike Duration 1 2 3 4 5 (x: weeks) 0.50 0 42 42 48 48 48 0.35 8 50 50 56 52 56 0.15 54 54 60 56 60 12

Cost Analysis
Summary Mild December Probability Alternative Alternative Alternative Alternative Alternative Strike 1 2 3 4 5 0.50 $20,000 $30,000 $9,000 $0 $0 0.35 $21,000 $31,000 $73,000 $14,000 $64,000 0.15 $53,000 $63,000 $135,000 $76,000 $126,000

Summary Cold December Probability Alternative Alternative Alternative Alternative Alternative Strike 1 2 3 4 5 0.50 $20,000 $30,000 $9,668 $668 $668 0.35 $21,000 $31,000 $73,000 $14,000 $64,000 0.15 $53,000 $63,000 $135,000 $76,000 $126,000

Risk Analysis

Expected Losses and Uncertainty in mild December


$60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Alternative Alternative Alternative Alternative Alternative 1 2 3 4 5 E(x) SD(x)

Risk Analysis

Expected Losses and Uncertainty in cold December


$60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Alternative Alternative Alternative Alternative Alternative 1 2 3 4 5 E(x) SD(x)

Risk Profiles
Risk Profile of losses with mild December

$140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 0.15 0.35 0.5 Probabilities Alternative 1 Alternative 2 Alternative 5 Alternative 4 Alternative 3 Alternative 2 Alternative 1 Alternative 3 Alternative 4 Alternative 5

Risk Profiles
Risk Profile of losses with cold December

$140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 0.15 0.35 0.5 Probabilities Alternative 1 Alternative 2 Alternative 5 Alternative 4 Alternative 3 Alternative 2 Alternative 1 Alternative 3 Alternative 4 Alternative 5

Recommendation 1. A4: Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring; if a strike occurs, expedite all activities after resolution (lowest E(x)) 2. A1: Expedite seat gallery supports (second lowest E(x))

Conclusion
  A1 is better than A2 and A3 if the probability/risk of a strike is considered. A4 provides the option of speeding up the remaining tasks in case of a strike and doing nothing otherwise. This option is powerful. A4 has a lower but a higher uncertainty (broad range of losses from $0 to $76,000) than A1. The analysis of the risk profiles will help management to select the alternative which fits the corporations risk strategy. If the corporation is adverse to risk, it could select A1 (losses are spread out from $20,000 to $53,000). A1 has a lower uncertainty than A4. The project duration could be a factor for the decision, if there are projects on hold due to lack of resources.