ABC Corporation had decided to respond to a government RFP for the R&D phase on a new project. The statement of work specified that the project must be completed within ninety days after go ahead, and that the contract would be at a fixed cost and fee. The majority of the work would be accomplished by the innovation lab. According to government regulations, the estimated cost must be based on the average cost of the entire department, which was $19.00 per hour. ABC won the contract for a total package. (cost plus fee) of $305,000. After the first weekly labour report was analysed, it. became evident that the innovation lab was spending $28.50 per hour. The project manager decided to discuss the problem with the manager of the innovation lab. Project manager: I am sure you understand why I'm here. We'll be 50 percent over budget if you keep spending money like this. Lab manager: That's not my issue; it's yours. When I estimated the cost of a task, I only included the hours that were required based on historical data. Based on department averages, the pricing department converted the hours into dollars. Project manager: Well, but why are we choosing the costliest people for the work? There must be lower-salaried people capable of performing the work. Lab manager: "Yes, I do have lower salaried people, but none who can complete the job within the two months required by the contract. I have to use people high on the learning curve, and they're not cheap. You should have told the pricing department to increase the average cost for the department." Project manager: "I wish I could, but government regulations forbid this. If we were ever audited, or if this proposal were compared to other salary structures in other proposals, we would be in deep trouble. Why couldn't you have increased the hours to compensate for the increased dollars required?" Lab manager: "I have to submit labour justifications for all hours I estimate. If I were to get audited, my job would be on the line. Remember, we had to submit labour justification for all work as part of the proposal. "Perhaps next time management might think twice before bidding on a short duration project. You might try talking to the customer to get his opinion." Project manager: "His response would probably be the same regardless of whether I explained the situation to him before we submitted the proposal or now, after we have negotiated it. Questions: a) What is the basis for the problem? b) Who is at fault? c) How can the present situation be corrected? d) Is there any way this situation can be prevented from recurring?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
ABC Corporation had decided to respond to a government RFP for the R&D phase on a new project. The statement of work specified that the project must be completed within ninety days after go ahead, and that the contract would be at a fixed cost and fee. The majority of the work would be accomplished by the innovation lab. According to government regulations, the estimated cost must be based on the average cost of the entire department, which was $19.00 per hour. ABC won the contract for a total package. (cost plus fee) of $305,000. After the first weekly labour report was analysed, it. became evident that the innovation lab was spending $28.50 per hour. The project manager decided to discuss the problem with the manager of the innovation lab. Project manager: I am sure you understand why I'm here. We'll be 50 percent over budget if you keep spending money like this. Lab manager: That's not my issue; it's yours. When I estimated the cost of a task, I only included the hours that were required based on historical data. Based on department averages, the pricing department converted the hours into dollars. Project manager: Well, but why are we choosing the costliest people for the work? There must be lower-salaried people capable of performing the work. Lab manager: "Yes, I do have lower salaried people, but none who can complete the job within the two months required by the contract. I have to use people high on the learning curve, and they're not cheap. You should have told the pricing department to increase the average cost for the department." Project manager: "I wish I could, but government regulations forbid this. If we were ever audited, or if this proposal were compared to other salary structures in other proposals, we would be in deep trouble. Why couldn't you have increased the hours to compensate for the increased dollars required?" Lab manager: "I have to submit labour justifications for all hours I estimate. If I were to get audited, my job would be on the line. Remember, we had to submit labour justification for all work as part of the proposal.
"Perhaps next time management might think twice before bidding on a short duration project. You might try talking to the customer to get his opinion." Project manager: "His response would probably be the same regardless of whether I explained the situation to him before we submitted the proposal or now, after we have negotiated it.
Questions:
a) What is the basis for the problem?
b) Who is at fault? c) How can the present situation be corrected?
d) Is there any way this situation can be prevented from recurring?
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