KAPALA CONSTRUCTION COMPANY

The Kapala Construction Company is building the new Kona Country Club Villas project, consisting of 18 buildings, each housing 10 condominiums. Each building will border the Kona Country Club golf course designed by Arnold Palmer. The minimum price for a condominium unit is $275,000, and buyers expect a high-quality project. Response to the initial promotion was so great that Kapala Construction pre-sold all 180 units based solely on an artist’s conception and schematic plans of the project. One reason for the quick sellout may have been the “YOU CAN MOVE IN BY SUMMER” campaign. As part of this campaign, Kapala promised rebates of $10,000 cash to all 180 buyers if all the facilities, buildings and other amenities were not completed by June 15 of next year.

As of September 15, the project is well underway. Table 1 provides the details concerning the tasks remaining to be completed in the project. All tasks except for Activity R, the underground sewer activity, and Activity T, the stream building activity, have been assigned to the appropriate subcontractors. The company has already incurred costs in the amount of $30,000,000 (e.g., land costs, etc.). Table 2 shows the list of activities remaining with the normal cost given for each activity, the maximum amount by which any activity can be crashed, and the additional cost of crashing that activity by the amount shown.

Assume that today is Monday, September 15, and that all work is to be done on a five-day-per-week basis that includes holiday periods [i.e., assume a total of 195 days to complete project]. Refer to Table 3. As one consideration, recommend whether to spend $25,000 for additional legal assistance that would reduce the most likely time to attain the final permits and releases (Z) from 15 to 12 days and its pessimistic time from 25 to 18 days.

The Project Manager has been requested to review the tasks and desired dates and prepare a report on the feasibility of the time line. As part of the report to management concerning the scheduling of activities, consider including visual aids and discussing specific probabilities. And, you would want to include:
1. executive summary
2. Problem statement
3. A Gantt chart for the activities and explanation of its use.
4. The network (PERT) diagram.
5. Explanation of the time it will take to complete the project with the normal times given (i.e., establish a baseline time).
6. Based upon the baseline projections and alternatives, discuss the probabilities of completing the project at various times and the cost consequences.
7. Use the expected time activities time you calculate as the normal times and the crash times as shown in Table 2.
8. Prepare a cash flow chart for your recommended alternative. If the cost of money is 10%, what would you recommend with respect to early-start versus late-start?
9. Suggest other factors which might influence your decision.

Table 1: Remaining Activities (Immediate Predecessors & Time Estimates)

Activity
Description
Immediate Predecessor
Optimistic
Most Likely
Pessimistic

A
Land measurements

5
10
15

B
Layout of measurement stakes
A
7
12
20

C
Analysis of surrounding environment
A
12
20
34

D
Building of foundation
B
12
22
38

E
Approval of construction papers
C
6
13
21

F
Layout of building framework
C
11
15
27

G
Gas line installation
C
9
18
22

H
Electrical wiring
B,E
25
27
29

I
Interior plumbing
B,E
18
20
40

J
Wall construction
D,H
12
25
32

K
Insulation
F,I
10
23
33

L
Drywall
F,I
15
20
25

M
Roofing
J,K
3
10
20

N
Restaurant Construction
G
25
40
55

O
Swimming pool
G,J,K,L
9
20
40

P
Fencing
G,J,K,L
6
10
21

Q
Telephone lines
M,O
14
25
42

R
Completion of underground sewers
M,O
See note #1

S
Snack bar
N
10
20
30

T
Stream building
N
See note #2

U
Outside lighting
P,Q,S
8
12
15

V
Parking lots
P,Q,S
3
5
7

W
Drainage construction
P,Q,S,T
5
10
18

X
Safety inspection
U,W
9
15
25

Y
Landscaping
R,V
6
24
40

Z
Final permits/releases
X,Y
10
15
25

Note # 1:

Activity R, the underground sewer activity, consists of installing pipes and connections to join all 18 buildings to the main city sewer system. Kapala has two alternatives for this activity:

1. Coastal Brothers has submitted a bid of $300,000 for the design and construction of the required sewer project. It estimates a most likely completion time of 25 days with a difference of plus or minus two days for the optimistic and pessimistic time estimates.

2. Kapala can design the sewer project itself and hire another company, Seabird Construction, to build the system according to Kapala’s specifications. Seabird will charge Kapala $20 per foot of sewer built. Seabird estimates that it can build between 200 and 360 feet of sewers per day; its most likely estimate is 300 feet per day. To minimize disruption to the aesthetic beauty of the project, sewers will run underneath the paths between condominium buildings.

Note # 2:

Activity T, the stream building activity, involves building a stream that runs throughout the project and connects the western and eastern boundaries. Again Kapala has two options:

1. Kapala has received a bid of $400,000 from River Construction to design and build a meandering stream that will most likely be finished in 30 days, give or take 5 days.

2. Kapala can design and direct the stream construction. The actual work will be performed by the Overwater Company at a price of $50 per foot. Overwater estimates that it will take a full day to complete 60 feet on the steam project. Since Kapala would like to conserve costs, if it designs the stream, it will have the minimal distance and parallel paths between the condominium buildings. Kapala estimates that overall completion time for this activity will be no more than 10 days longer or less than 10 days shorter than the Overwater estimate.

Table 2. Normal Cost, Crash Days and Crash Cost
Activity ID Normal Cost Maximum Days Additional Crash Cost
A $260,100 1 $25,000
B $375,000 1 $35,000
C $600,000 1 $40,000
D $690,000 2 $60,000
E $395,100 1 $25,000
F $489,900 1 $35,000
G $515,100 1 $30,000
H $819,900 2 $60,000
I $665,100 1 $30,000
J $720,000 1 $45,000
K $675,000 1 $31,000
L $600,000 2 $62,000
M $315,000 1 $29,000
N $1,200,000 2 $59,000
O $645,000 0 $0
P $335,100 1 $32,000
Q $699,900 2 $65,000
R $750,000 0 $0
S $600,000 1 $28,000
T $900,000 0 $0
U $354,900 1 $37,000
V $150,000 0 $0
W $315,000 0 $0
X $470,100 1 $30,000
Y $710,100 1 $32,000
Z $474,990 0 $0

Table 3. Days by Month

Month
Days

September
10

October
22

November
21

December
20

January
21

February
20

March
23

April
21

May
22

June
15

Total working days
195

Exhibit 1 is a map of the feasible pathways between the condominium buildings which may be used for sewer construction or stream construction.

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