GTB Construction Company GTB Construction Company is a small organization with 9
ID: 358702 • Letter: G
Question
GTB Construction Company
GTB Construction Company is a small organization with 90% of its peso volume obtained from contracts for municipal work. Management decided to submit a bid for the construction in April of a mile-long extension to the main sewer system in a nearby town that until now has used septic tanks. The bidding is expected to be competitive, because whoever gets this contract will have some advantage in obtaining a contract to be awarded by the town later in the year worth approximately P100 million. In order to submit the most competitive bid possible, the project managers of GTB decided to evaluate the alternatives of using one, two, or three work shifts.
Exhibit I shows time and cost estimates of GTB’s engineers. The trunk sewer extension is to be laid in a tunnel for 1/3 its length; the remaining 2/3 is to be constructed in trenches. To build the tunnel, a primary shaft must be excavated first, then the secondary shafts can be driven and the tunnel can be dug simultaneously. The trench is to be started at the same time as the primary shaft. Another crew of workers follows the trench workers, laying pipes, pouring concrete, and refilling trenches as far as they have been excavated. The excavators lose no time as a result of this follow up. A third group would be performing a similar function in the tunnel.
GTB’s direct labor is hired from union pools, the common practice of all construction companies in the area. There is a strong chance that the local Excavators Union will strike on the project’s inception date that may seriously affect its profitability. At a meeting of the project managers, there was consensus to use 80% probability of such a strike for planning purposes. With a strike, direct costs would remain unchanged, since the issue involved was not one of wages; but indirect costs would accrue for the duration of the strike at the same daily rate as indicated in Exhibit I. General and administrative costs are put at 40% of the sum of direct and indirect costs. Normally, GTB aims at making a profit equal to 10% of total costs.
There was also a recognized need to develop some kind of estimate to describe the probability of the strike’s duration. With a great deal of misgiving, the project managers came up with the following guesses:
Length of the strike in days 20 30 40
Probability of a strike of n days on the condition 0.25 0.25 0.50
that a strike occurs
Your group was assigned to spearhead the project. The president of GTB asked your group for a detailed recommendation, including the exact bid to be submitted by the company.
Exhibit I
One Shift
Two Shifts
Three Shifts
ACTIVITY
Days
Cost (P)
Days
Cost (P)
Days
Cost (P)
A Move in machinery/equipment
12
3,000
6
3,300
4
3,600
B Excavate primary shaft
12
6,950
12
6,950
12
6,950
C Excavate secondary shafts
60
6,250
24
6,600
12
6,950
D Excavate trenches
300
33,700
150
42,500
100
44,700
E Excavate tunnel
305
36,150
155
39,100
105
40,000
F Backfill (trenches only)
50
1,000
25
1,500
17
2,000
G Pipe-laying in trenches
50
7,500
25
8,200
17
8,900
H Pipe-laying in tunnel
46
5,500
25
5,700
16
6,000
I Pour concrete in trenches
70
11,400
35
11,650
25
11,850
J Pour concrete in tunnel
60
11,000
30
11,250
20
11,500
K Landscape
10
2,000
8
2,900
6
3,000
L Move out
6
500
3
750
2
1,000
TOTAL INDIRECT COSTS
P140 / day
P160 / day
P180 / day
Analysis
Immediate Preference
To know the flow of activities of leading the construction of the sewer system, the group established as Immediate Preference Relationship as depicted in the table below.
Immediate Preference
To know the flow of activities of leading the construction of the sewer system, the group established as Immediate Preference Relationship as depicted in the table below.
Activity
Predecessor
A
Move in machinery/equipment
-
B
Excavate primary shaft
A
C
Excavate secondary shafts
B
D
Excavate trenches
A
E
Excavate tunnel
B
F
Backfill (trenches only)
G
G
Pipe-laying in trenches
D
H
Pipe-laying in tunnel
C,E
I
Pour concrete in trenches
G
J
Pour concrete in tunnel
H
K
Landscape
F,J
L
Move out
K
Question 1: Please help me do a PERT Chart regarding this case. It should show the project duration of each option. In summary, 1 shift would need 500 days to finish the construction, while the 2 and 3 shifts would take 750 days and 1000 days, respectively. Also, please let me know if my immediate precedence is correct.
One Shift
Two Shifts
Three Shifts
ACTIVITY
Days
Cost (P)
Days
Cost (P)
Days
Cost (P)
A Move in machinery/equipment
12
3,000
6
3,300
4
3,600
B Excavate primary shaft
12
6,950
12
6,950
12
6,950
C Excavate secondary shafts
60
6,250
24
6,600
12
6,950
D Excavate trenches
300
33,700
150
42,500
100
44,700
E Excavate tunnel
305
36,150
155
39,100
105
40,000
F Backfill (trenches only)
50
1,000
25
1,500
17
2,000
G Pipe-laying in trenches
50
7,500
25
8,200
17
8,900
H Pipe-laying in tunnel
46
5,500
25
5,700
16
6,000
I Pour concrete in trenches
70
11,400
35
11,650
25
11,850
J Pour concrete in tunnel
60
11,000
30
11,250
20
11,500
K Landscape
10
2,000
8
2,900
6
3,000
L Move out
6
500
3
750
2
1,000
TOTAL INDIRECT COSTS
P140 / day
P160 / day
P180 / day
Explanation / Answer
The company has to have the bonds with the suppliers of the construction material as the construction of the plant mainly depends upon the availability of construction material.
The firm must have the performance bond which is a bond which states that the firm which is entering into the bond will perform all the activities till the project is complete according to the given budget, time frame, and other stated conditions.
The firm can ensure the availability of construction material at a predetermined price during the entire tenure of the project.
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