CVEN349HW3-BENMOORE

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Apr 3, 2024

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1 T EXAS A&M U NIVERSITY Z ACHRY D EPARTMENT OF C IVIL E NGINEERING CVEN 349: C IVIL E NGINEERING P ROJECT M ANAGEMENT Spring 2024 Assignment 3 TOTAL POINTS: 100 DUE: February 29, 2024 OBJECTIVES Become familiar with financial decision making, contract documents, and construction project bidding concepts. DELIVERABLES Submit this assignment. RESPONSIBLE PARTIES This is an individual assignment. Part I ( 50 points ) 1. The job outlook for civil engineering engineering graduates is rosy. As a result, the city of College Station must plan for a new aluminum recycling plant because of the alarming rise in craft beer consumption packaged in aluminum cans and the resulting waste stream impacts. The city has asked you to review two proposed recycling plant designs and construction and annual maintenance costs as shown below. Year (t) Design No. 1 ($1000s) Design No. 2 ($1000s) 0 1-20(each yr) 1,250 100 (O&M) 1,030 135 (O&M) Both designs will be constructed by March 2025, last 20 years, and because of the wear and tear of the recycling process, the facilities have no salvage value. The Federal government will subsidize 50% of the initial capital cost, and has a policy to subsidize 8% of the annual maintenance cost of capital recycling costs incurred by local governments. The City of College Station will seek a loan to finance 25% of the initial capital cost at a borrowing rate of 8% with 20 equal annual payments including principal and interest. The MARR for this type of project is 15% reflecting its operating risk (Hendrickson chapter 6; http://pmbook.ce.cmu.edu/ ) a) What is the uniform annual revenue that must be collected in the next 20 years to make each of the two designs worthwhile from the view of the City of College Station? ( 20 points ) DESIGN A - INITIAL COST (P = 1,250) Federal Subsidy  50% .5 * P = 625 LOAN  25% .25P(A/P,8%,20) = 31.8

2 Initial Payment  25% .25P(A/P,15%,20) = 49.9 - OM (A=100) Federal Subsidy  8% .08A = 8 Atot = (100-8) + 31.8 + 49.9  173.7 DESIGN B - INITIAL COST (P = 1,030) Federal Subsidy  50% .5 * P = 625 LOAN  25% .25P(A/P,8%,20) = 26.2 Initial Payment  25% .25P(A/P,15%,20) = 41.1 - OM (A=135) Federal Subsidy  8% .08A = 10.8 Atot = (135-10.8) + 26.2 + 41.1  191.5 b) Which design has a lower cost from this perspective? ( 20 points ) - Design A has the lower cost from this perspective because it has the lower annual revenue needed to make the project profitable. c) Should the City give consideration to the idea that the job market may significantly change before March 2024? In other words, what happens if beer drinking in Paris goes way up or way down? ( 5 points ) - Future considerations should be made. - If aluminum becomes scarce or increases in price, then the consumption of beer in aluminum cans will decrease defeating the need for this project - The revenue decreases if consumption decreases and increases if consumption increases. - Beer consumption directly correlates to the viability of this project and since the lifetime is 20 years considerations for the future must be made to ensure that the project can/will be profitable. d) What other ways could the worth of the above project be financially assessed? ( 5 points ) - Annual average rate of return (IRR) o IRR > MARR (viable project) o IRR < MARR (not viable) o IRR = MARR (breakeven) - Net Present Value (NPV) o NPV > 0 (viable) o NPV < 0 (not viable)

3 o NPV = 0 (breakeven) PART II ( 50 points - breakdown as noted for each questions) 1. Describe what is the purpose of the following documents in a construction contract ( 10 points ) ? a. General conditions - Provide conditions regarding the division of responsibilities of the projects duties between the teams involved. Lays out safety measures and methods for the parties involved. b. Technical specifications - Provides standards and specifications for all the materials and products being used and built. c. Supplementary conditions - Supplemental to the general conditions these lay out more aspects of the project like relationships as well as the duration of the project. d. Addenda - Provides any additional specifications to ensure that all of the documents received are based on the latest data. 2. For its construction projects, TxDOT provides a list of bid items as well as the number of units for each bid item. Contractors who bid must provide a cost estimate for each bid item. To facilitate bidding TxDOT provides the average low bid unit price for all items and publishes the State-wide average low bid prices at https://www.dot.state.tx.us/insdtdot/orgchart/cmd/cserve/bidprice/s_0101.htm . Complete the following table for the listed bid items. ( 20 points ) Item No Description Units March 31, 2019 Twelve Month Moving Quantity Avg. Bid Quantity Avg. Bid 132 - 6033 EMB(FNL)(DC)(TYC)(CSBE)(RWALL FND IMPR CY 22,036.000 54.06097 346 - 6015 STONE-MTRX-ASPH SMA-D SAC-A PG76-28 TON 51,669.000 137.20000 367,614.500 115.28268 416 - 6004 PRESTR CONC PIL (24 IN SQ) LF 32,592.000 100.07309 672 - 6009 REFL PAV MRKR TY II-A-A EA 149,471.000 1.23621 1,849,353.980 2.73643 3. Bidding is how contractors obtain work and how owners find contractors. Contractors interested in working for TxDOT must provide a unit price for each of the unit quantities provided by TxDOT. For the Jan 2021 letting to build a bridge in Midland County (Midland, District). TxDOT project CCSJ : 0005-14- 084 answer the following questions: ( 20 points ) a. What was the (TxDOT) engineers estimate for the cost of this project? (2 points) - $61,937,171.95 b. How long is the project expected to take? (2) - 1 year c. What was the winning bid price, by who, and how much was this over/under the engineers estimate? (2) - $59,101,873.52 (-4.58%) d. What may have driven the contractor to bid lower than the engineers estimate? (4) - The contractor may have had easier access to some of the materials necessary for the project and therefore was able to bid lower on the project and in turn have a higher chance of being awarded the contract in comparison to the other contractors who bid on this project. e. What was the highest cost Unit Bid line item for this project? Why so much for this item? (5)

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4 - Furnishing and Placing Topsoil - The volume of material needed for this part of the project is very high and each contractor must bid on based on how accessible the material is to them. The volume multiplied by the unit price can drive the price up for this line item. f. Why could there be such a big difference between the winning and highest bid? (5) - Some contractors don’t have the same access to materials, products and labor necessary for the project so they must bid based on how they value each of these aspects while also trying to maximize profits.

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