Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

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.