Sharon Construction Case Study

Case Study (1)

- Sharon Construction Corporation

April 16, 2013

Case situation• Project- 200,000 seat stadium • Start from Feb. 15, expected finish time: 1 year• Overhead cost of $500 per week for any delay after 52 weeks• Penalty of $15,000 per week of delay beyond next Feb. 15 • Uncertainties: Strike and Weather in December (42th weeks).

1.) Possible labor strike in Dec.: No Strike, P=50%; Strike:+8 weeks , P=35%; +12 weeks , P=15% 2.) Possible heating need: 33% with extra heating cost $500 per week, 67% with no heating need.

Five proposals • 1. Expedite the pouring of seat gallery supports with extra cost

$20,000 and cut 6 weeks• 2. The same as proposal 1, but in addition, expediting filling of

the field with extra cost $10,000 and cut 5 weeks • 3. Expedite the roofing with extra cost $9,000 and cut 6 weeks • 4. Do nothing until Dec. 1. If it is cold, delay the pouring or

heating; If a strike occurs, expedite all activities after strike over with extra cost $3000 per activity per week.

• 5. Do nothing until Dec. 1.

A clean site

B Subsurface drainage

CField & Truck filling

DTurf

installation

EExcavation

FPouring concrete footing

G Pouring

seat gallery

support

HPre cast galleries

IPouring

concrete seats

JInstalling

steel structure

K Roof

erection

LBuilding dressing

room

MSeat

paintingFINISH

NLight

installation

OScoreboard &

facilities

Precedence Network

8

80

8

8

8

16

4

12

16

14

30

12

4

16

16

30

12

12

28

16

4 8

20 20 28

28

42

41

13

41 45

428

4

32

45 48

3

28

285

4

33

48

32

Critical Path: A E F G H I M

A clean site



DTurf

installation

EExcavation


G Pouring

seat gallery

support

HPre cast galleries

IPouring

concrete seats

JInstalling

steel structure

K Roof

erection

LBuilding dressing

room

MSeat

paintingFINISH

NLight

installation

OScoreboard &

facilities

8

80

8

8

8

16

4

12

16

14

30

12

4

16

16

30

12

6

22

16

4 8

20 20 28

22

42+X

35

13

35 39

428

4

32

39 42+X

3

28

285

4

33

42+X

32

Proposal 1Possible strike occurs in 42th week

Possible strike occurs in 42th week

Actual CostP(Strike) No heating

(P=67%)Heating(P=33%)

No strike, P=50% $20,000 $20,000

Strike +8w, P=35% $20,000 $20,000

Strike +12w, P=15% $51,000 $51,000 $20,000[Expediting cost]+(42+12-52) x ($15,000[Penalty]+$500[Overhead]) =$51,000

A clean site



DTurf

installation

EExcavation


G Pouring

seat gallery

support

HPre cast galleries

IPouring

concrete seats

JInstalling

steel structure

K Roof

erection

LBuilding dressing

room

MSeat

paintingFINISH

NLight

installation

OScoreboard &

facilities

8

80

8

8

8

16

4

12

16

9

25

12

4

16

16

25

12

6

22

16

4 8

20 20 28

22

37

35

13

35 39

428

4

32

39 42+X

3

28

285

4

33

42+X

32

Proposal 2

Possible strike occurs in 42th week

Actual Cost

$30,000[Expediting cost] +(42+12-52)x ($15,000[Penalty]+$500[Overhead cost]) = $61,000

P(Strike) No heating (P=67%)

Heating(P=33%)

No strike, P=50% $30,000 $30,000

Strike +8w, P=35% $30,000 $30,000

Strike +12w, P=15% $61,000 $61,000

Scenario of Proposal 3

scenario

No Strike

Good weather no heating needed,

done within 48 weeks

Bad weather, delay 4 weeks, no heating

needed, done within 52 weeks.

Bad weather, heating needed, done within

48 weeks

Strike

+8 weeks strike, no heating needed, done

within 56 weeks

+12 weeks strike, no heating needed, done

within 60 weeks

A clean site



DTurf

installation

EExcavation


G Pouring

seat gallery

support

HPre cast galleries

IPouring

concrete seats

JInstalling

steel structure

K Roof

erection

LBuilding dressing

room

MSeat

paintingFINISH

NLight

installation

OScoreboard &

facilities

8

80

8

8

8

16

4

12

16

14

30

12

4

16

16

30

12

12

28

16

4 2

20 20 22

28

42+X

41

13

41 45+X

422

4

36

45+X 48+X

3

22

225

4

27

48+X

26

Proposal 3Possible strike and cold weather occur in 42th week

Possible strike and cold weather occur in 42th week



No strike, P=50% $9,000 $11,000

Strike +8w, P=35% $71,000 $71,000

Strike +12w, P=15% $133,000 $133,000 $9,000[Expediting cost] +(48+12-52) x ($500[Overhead cost] + $15,000[Penalty]) =$133,000


scenario

No Strike

Good weather, no heating needed,



needed, done within 52 weeks


48 weeks

Strike

+8 weeks strike, Crash 4 weeks, no heating


+12 weeks strike, Crash 4 weeks , no heating


A clean site



DTurf

installation

EExcavation


G Pouring

seat gallery

support

HPre cast galleries

IPouring

concrete seats

JInstalling

steel structure

K Roof

erection

LBuilding dressing

room

MSeat

paintingFINISH

NLight

installation

OScoreboard &

facilities

8

80

8

8

8

16

4

12

16

14

30

12

4

16

16

30

12

12

28

16

4 8

20 20 28

28

42+8

41

13

41 49+2

4-2=228

4

32

51 51+1

3-2=1

28

285

4

33

52

32





No strike, P=50% $0 $2,000

Strike +8w, P=35% $12,000 $12,000

Strike +12w, P=15% $74,000 $74,000

42+12

53+2

55 55+1

56

$3,000[crash cost]x4 +(56-52) x ($500[Overhead cost] + $15,000[Penalty]) = $74,000

$3,000[ Expediting cost] x 4 weeks= $12,000


scenario

No Strike

Good weather, no heating needed,





48 weeks

Strike

+8 weeks strike, no heating needed,


+12 weeks strike,no heating needed,


A clean site



DTurf

installation

EExcavation


G Pouring

seat gallery

support

HPre cast galleries

IPouring

concrete seats

JInstalling

steel structure

K Roof

erection

LBuilding dressing

room

MSeat

paintingFINISH

NLight

installation

OScoreboard &

facilities

8

80

8

8

8

16

4

12

16

14

30

12

4

16

16

30

12

12

28

16

4 8

20 20 28

28

42+X

41

13

41+X 45+X

428

4

32

45+X 48+X

3

28

285

4

33

48+X

32





No strike, P=50% $0 $2,000

Strike +8w, P=35% $62,000 $62,000

Strike +12w, P=15% $124,000 $124,000(48+8-52)x ($500[Overhead cost]+$15,000[Penalty])= $62,000

Cost AnalysisNo heating Scenario (67%)

Heating needed Scenario (33%)

Probability Strike Proposal 1

Proposal 2

Proposal 3

Proposal 4

Proposal 5

No Strike- 50% $20,000 $30,000 $9,000 $0 $0

+8 weeks- 35% $20,000 $30,000 $71,000 $12,000 $62,000

+12 weeks- 15% $51,000 $61,000 $133,000 $74,000 $124,000

EMV $24,650 $34,650 $49,300 $15,300 $40,300


Proposal 2

Proposal 3

Proposal 4

Proposal 5

No Strike- 50% $20,000 $30,000 $11,000 $2000 $2000

+8 weeks- 35% $20,000 $30,000 $71,000 $12,000 $62,000

+12 weeks- 15% $51,000 $61,000 $133,000 $74,000 $124,000

EMV $24,650 $34,650 $49,330 $15, 630 $40, 630

Recommendation based on Cost Analysis-EMV method

• Choose proposal 4• Proposal 1 would be the second choice

Reason• Proposal 4 has the lowest EMV, and it can end up with no

extra cost.• Proposal 1 would be the second choice because it has

second lowest EMV and is better than 2, 3 and 5 if a strike happens.• If the CEO is adverse to risk, then select proposal 1

which has smaller loss range (from $20,000 to $ 51,000)

Time Analysis


Proposal 2

Proposal 3

Proposal 4

Proposal 5

No Strike- 50% 42 42 48 48 48

+8 weeks- 35% 50 50 56 52 56

+12 weeks- 15% 54 54 60 56 60

Make span 46.6 46.6 52.6 50.6 52.6

Recommendation based on Time Analysis

• Take proposal 1• Proposal 4 would be the second choice

Reason• Proposal 1 & 2 has the shortest average duration, but

proposal 2 costs more. • Proposal 4 would be the second choice because it has

second shortest average duration and is better than proposal 1 if the cost-time ratio is considered.• If the CEO cares time the most, then select proposal 1.

Other factors• Behavioral – Employee morale and enthusiasm if a strike

occurs. Is this company brand oriented?• Organizational – Will a strike and falling behind schedule lead

to layoffs or low morale? Does the sub-contractor have the capacity to work in an expedited scenario?

• Political- Will local or state government become involved in a labor dispute

• Financial- how urgently does the firm need cash flow? Will early completion lead to financial benefits?

• Cultural – If labor force is mostly of the same background, they may be more culturally or less culturally likely to strike.

Decision making as the president• I will choose proposal 4.• The first reason is obvious that it has the lowest EMV. I am a

risk seeker so I do not think the broader loss rang would be a big problem.

• Although proposal 4 has longer duration than proposal 1 based on Time Analysis. Besides, there is no extra bonus if we get it done earlier. For financial reason, I will choose proposal 4 for sure.

Sharon Construction Case Study

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