PEARSON CONSTRUCTION CO., INC. (PCCI) - EXERCISE

The Pearson Construction Co., Inc. (PCCI) is in the process of building a water tank and installing a pump at one of its construction sites. The following table and project AON network show the information on the activities to be performed and their normal durations (days), as well as the crash durations with their corresponding extra costs.

Project Information Table:

The chief engineer notes that the normal durations specified in the above table are

the most likely durations. He also provides the optimistic and pessimistic durations of

each of the activities in the table. According to his experience, the task durations follow

triangular distributions.

Project AON Network:

PCCI has promised to deliver the construction in 20 working days. The contract

specifies penalties of 2,500 euros per day late. In addition, the client is interested in

getting the construction done as soon as possible, and promises PCCI a bonus of 1,250

euros for every day of delivery earlier than promised (20 days).

Question 1. Based on the current schedule, what is the chance that PCCI will need to

Question 2. Based on the current schedule, what is the chance that PCCI can get extra

Question 3. If PCCI wants to increase its chance of getting bonuses and/or avoiding

penalties, which task should PCCI consider to crash first?

Medical Imaging Products Corp.

The Medical Imaging Products (MIP) Corp. was anxious to get a new model CATSCAN

(computerized axial tomography scanner) onto the market. Past efforts to introduce new models had resulted in frustrating failures. Bret Ricks, president of MIP, was determined that it would not happen again with the newest model. He had no confidence in his current management team, so he hired Jan Dymore, a local consultant, to organize and manage this project. He also assigned an MIP manager, Tom Gort, to work with Jan to start developing some talent for project management within the company. Due to the high uncertainty of the project, Jan decided to take a PERT approach and guided Tom through the process of listing activities, assigning precedence, and estimating completion times. She also explained the critical path concept to Tom, who by this time had a reasonable grasp of the project direction. At the first review meeting with Mr. Ricks, the PERT approach was accepted enthusiastically, but toward the end of the review meeting Jan made some critical remarks about the product design and was subsequently released

from the project.

Ricks then asked Tom if he could carry on the PERT approach by himself Tom jumped

at the chance, but later in his office he began to question whether or not he really could use PERT effectively. Jan had made a guess at what the critical path would be and how long the project would take, but she had also told Tom that several other calculations had to be made in order to calculate the time estimates and the variance for each activity. Tom really did not understand the mathematics involved and certainly didn't want to look bad in Rick's eyes, so he decided to take Jan's guess at the critical path and get the best possible estimates of those activity times. By concentrating his attention on the critical path activities and ignoring the variance issues, he is very confident to bring the project in on time.

Question: Will Tom's approach work? What should Tom watch out for?

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