Project Costing – Final Assignment

Project Costing – Final Assignment

The Circumstances

You are employed by a company in Australia and the CEO has decided that the company should bid for work in a new area of business. The CEO requires a briefing document to outline the risks of contracting for work in the new area, recommendations to minimise these risks where appropriate, and the anticipated costs, resources and timing to prepare a typical bid for a contract in this new area of business.

What Is Required In This Assignment?

You are to prepare a report to the CEO which will go to the company board as a briefing document. The briefing document must have sufficient background supporting data to give the CEO confidence about the result, but only the executive summary will go to the board.

The report will contain the following parts:

1. An executive summary to go to the Board.

2. A risk assessment summarising the major risks of contracting this work and your recommendations on how to reduce these risks.

3. An estimate of the costs to prepare a bid for a contract of this type and value.

The estimate is to be summarised in a table by department (rows) and work phase (columns & total).

4. A schedule (prepared in MS Project 2010) for the bid preparation. The Schedule is to identify the work phase and department for each activity.

5. An appendix summarising your background research on three projects.

(A summary is required for each project and articles should be referenced rather than printed out. The summary is to focus on the risks encountered and how they were managed.)

You will research and examine three (3) projects for the type of work for which the CEO considers your company should consider bidding. The projects to be considered by the company must be of a similar type and size.

You should choose projects that relate to the field of study for which you are enrolled (e.g. civil infrastructure, production engineering, electronics, etc.) and they are to be of a similar magnitude. A list of some suitable (mostly civil) topics is suggested in Item 2 below. That list is not extensive and you may choose other topics, provided you have the agreement of the lecturer.

For the purposes of this assignment you are to choose three (3) projects of the same type from a topic related to the course that you are doing.

Points to be taken into account when choosing projects and types:

1. The type of project that you choose must be agreed by email with the lecturer before you commence the assignment. The projects reported upon must have been constructed after 1990 and had significant risks to overcome or reported significant delays, cost overruns and other risk occurrences. There will be a limit to the number of students who will be permitted to choose the same topic and projects. So get your requests in early! First come first served. (This requirement does not apply to distance learning students).

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CSM80001 Project Costing – Final Assignment

2. Read carefully through all of this assignment and do some preliminary research before you choose a topic. To enable you to meet the requirements of this assignment you must make sure that you have sufficient background knowledge and/or there is sufficient information available on the topic that you want to select. If not, you need to choose another topic for which you can find more information.

Some Suggestions for Suitable Project Topics –

Infrastructure projects such as: Highway extensions and upgrades, Tunnels, Steel or concrete bridges, Ports (harbours), Long distance pipelines, Railways, Desalination plants, Earth/rock fill or concrete dams, Airports

Large scale property development such as: High rise buildings, Satellite townships, Sport venues,

Other project types (particularly in your own field of study) such as: Software development, Manufacturing plant, Product development, or as may be agreed with the lecturer.

Some key search words ‘construction’ or ‘Project’ with ‘cost overruns’ and similar)

Another way to research possible areas of business is to look at the Engineers Australia infrastructure report card 2010 to be found at This reference describes various categories of infrastructure and contains key words and references that you can use can use in a search engine such as “Google” to find details of projects.

Various completed projects are described in detail in the Australian Constructors award for Project Insights going back to 2006, to be found atroject values can be found in media releases a or by searching. Note that these presentations put a favourable light on the projects and you should also search press articles and other more independent internet information such as delays, disputes or cost over runs.

1. The three (3) projects of the same type and approximate value that you choose must be selected and advised by email to the lecturer re 5 pm Friday 6th October 2017. 

2. Your email must give a short description of each project including the location, the contractor name, when they started, a one sentence description of the scope and the value.

NOTE: If too many students choose the same projects those who ask first with the above summary information will be accepted and the others will need to find alternative projects. So be early! You will be advised by email if the projects you nominate are accepted, or not. Students in the same team will not be permitted to choose the same topics.

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CSM80001 Project Costing – Final Assignment

Report on New Business Opportunities

The CEO has instructed you to prepare a detailed report to evaluate new business opportunities for contracts in Australia. When the CEO has reviewed your report and agrees with its content it will be presented to the company Board of Directors with recommendations to them to bid for this new work.

Your task is in parts, as detailed here:

Part 1: Executive summary to the Board

This part of the assignment is in the form of a 1 page (of text) summary plus suitable attachments summarising the significant risks (a before & after risk map and a list of risks with recommended mitigation) involved with executing this type of contract work, and a summary of the cost, and schedule (summary by department and work phase) to bid for the work. The attachments should not cover more than four pages.

Part 2: Risk assessment summarising the major risks of contracting this work.

The risk assessment and recommendations for mitigation must be summarised and reference made to significant difficulties reported in the press about existing contracts of this type. The attachments to the report will include a professional risk assessment for a typical project in this area and include a risk management plan (of not less than 10 risks ranked by significance, showing the treatment of risks) and a before and after risk matrix (of the 6 most significant risks).

Part 3 & 4: Estimate of the costs and a schedule to prepare a tender bid for a contract of this type.

For this you need to establish a budget estimate on an ‘Excel’ spread sheet for yourself (you are the bid manager) and project team involved in bid preparation:

Plan and schedule activities and resources to complete the report in the time allocated. Schedule to be prepared using ‘Microsoft Project 2010’ software. (Available as 60 Day free trial at http://www.microsoft.com/project/en-us/try.aspx).

Part 3 Estimate Preparation:

Additional information for this item

You have been advised by other colleagues that generally for design and construct contracts over $400 million the total cost to prepare a bid may be expected to cost in about $400,000 and take some 5 months to complete.

Establish a budget estimate on an ‘Excel’ spread sheet:

• An hourly cost rate for each of the individuals and departments assigned to the report preparation is to be used as the basis for the estimate.

 Note: The hourly rate calculation method to be use is as outlined in Chapter 8 of the course textbook. Hourly rates are to be without preliminaries or profit.

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CSM80001 Project Costing – Final Assignment

• Refer to the table below for a list of staff, annual salaries and resources on the team. Annual salary is the total paid salary per year excluding statutory superannuation payments.
• Each employee receives 4 weeks Annual Leave, 2 weeks Public Holidays, 2 weeks Sick Leave annually, plus a 17.5 % loading on their base salary during Annual Leave and long service leave (13 weeks after 10 years of service). Note that company policy is to make provision for the full amount for sick leave and long service leave even though employees may not take the full amount of this leave.
• Statutory loadings (superannuation (9.25%), payroll tax (5%), workers compensation insurance (1%), other insurance (6.5%)) as a percentage of total salary paid to employee
• Ignore in the calculations any severance pay based on period of service
• Salaried employees do not receive site allowance or overtime payments
• Add business unit overheads at the rate of 15.5% of the direct costs.
• List any estimated costs for travel and accommodation separately.
• Note: As in most organisations, the costs for the CEO salary and Board of Directors fees are paid for out of company overheads and profit and so have zero cost in your estimate.

Description		No.		Name			Annual
								Salary
Bid Coordinator		1		(Your Name)		$137,500
Bid production manager		1		Janice Nguyen		$58,500
Production assistant		1		Alan Waik		$62,500
Design Engineers (8 No.)		8		Design		$98,900
Construction Engineers (3		3		Construction		$102,100
No.)
Contracts (1 No.)		1		Contract		$98,700
Scheduler		1		John		$82,300
				Cavendish
Planning Engineer		1		John		$98,400
				Robertson
Lead Estimator		1		Chen Wong		$135,100
Estimator		1		Anne Nguyen		$120,500
Estimator		1		Andrew Brown		$113,600
Estimator		1		Lucy Wong		$81,900
Clerical Support		1		Enid Snedden		$47,400
Chief Executive Officer &		1		CEO				NA
Board

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CSM80001 Project Costing – Final Assignment

Part 4 Scheduling the Work

Draw p a schedule to plan your preparation of the bid, using the following information:

4.1         Planning the Bid Preparation

The bid is to be completed in five months. The team activities required to prepare the report are listed below and in the approximate sequence. You are to include site visits for project evaluation initially and prior to submission of the bid. (Refer to items 4 and 14 below).

You are to prepare a Gantt Chart schedule for these activities, assigning your best estimate of the duration that will be required for each. The above cost estimate that you prepare will also relate to this schedule. Some activities may have ‘Float’ and may overlap to meet the completion date specified:

Phase	Item	Activity		Key Dates
Scope Definition	1	Start date (request bid documents)		5-Mar-2018
	2	Receive bid documents & decide to bid	(plan for bid)
	3	Brief bid participants & stakeholders
	4	Site Project Evaluation visit
	5	Construction / Design prepare build strategy
	6	Engineering prepare bid design & sizing
Estimation	7	Quantity take off and BofQ
	8	Pricing standards for bid
	9	Pricing of BofQ
	10	Planning of Project
	11	Risk assessment of Project
	12	Set contingency & allowances
	13	Prepare Draft Bid document
Review	14	Bid clarification meeting (on site)
	15	Review bid with stakeholders
	16	Convert Draft to Final Bid
	17	Senior Management  Review
	18	Finalise bid for CEO Review
Submission	19	CEO Final Review
	20	Finalise documents for bid submission
	21	Submit Bid by 12 Noon		6-Aug-2018

Start Date is 5th March 2018 and the calendars are to include Victorian public holidays:

(See

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CSM80001 Project Costing – Final Assignment

4.2         Define Calendars

Calendar 5        5 days x 8 hours

4.3         Maintaining the Activity Codes

For internal reporting requirements during preparation of the report you need to identify:

Work Phase –

Scope Definition (Design, site visit, build strategy)

Estimation (Take off, pricing, planning & contingency)

Review (Internal review up to CEO review)

Submission (Final Price, Pricing Schedule, Documents & Submission)

Persons Responsible:–

Initials		Department		Description		No.		Name
YOU		Marketing &		Bid Coordinator		1		(Your Name)
		Sales
JAN		Marketing &		Bid production manager		1		Janice Nguyen
		Sales
ADW		Marketing &		Production assistant		1		Alan Waik
		Sales
DES		Engineering		Design Engineers (8 No.)		8		Design
CON		Construction		Construction Engineers (3		3		Construction
				No.)
CTR		Contracts		Contracts (1 No.)		1		Contract
JHC		Planning		Scheduler		1		John
								Cavendish
JKR		Planning		Planning Engineer		1		John
								Robertson
CEW		Estimating		Lead Estimator		1		Chen Wong
AYN		Estimating		Estimator		1		Anne Ng
AJB		Estimating		Estimator		1		Andrew Brown
LYW		Estimating		Estimator		1		Lucy Wong
EJS		Estimating		Clerical Support		1		Enid Snedden
CEO		Administration		Chief Executive Officer &		1		CEO
				Board

Departments –

Administration

Marketing

Construction

Engineering

Contracts

Estimating

Planning

Create Activity Code dictionaries and Activity Codes from the information above.

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CSM80001 Project Costing – Final Assignment

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CSM80001 Project Costing – Final Assignment

Part 5: Background Research and Report (for Submission to the CEO):

5.1 What You are required to do in Part 6

To prepare the report you need to undertake a literature review of key aspects of this proposed new field of activity. Your report is to include brief information on three (3) substantially completed projects. At least two of the projects must be in Australia. The projects reported upon must have been constructed after 1990 and had significant risks to manage or demonstrated delays, cost overruns and other risk occurrences. They should also be of a similar size (largest to be less than three times the smallest cost) and complexity.

The purpose of this information is to inform the CEO of your company of the key aspects of the proposed new field of activity.

5.2 Background Analysis of the Projects

Prepare a brief analysis in your own words of each of the three (3) projects that you have chosen. Paragraphs of text copied and pasted from articles or downloaded from the internet are not acceptable.

The analysis should include for each project a summary of:

• Names of the Client, Project Manager and major construction companies
• a description of the project, location(s), start & finish date.
• Project delivery system(s) used (see Chapter 2.4 of your notes).
• Key construction methods & temporary infrastructure required to carry out the works.
• $ value of project, converted to today’s dollars (Aust. Bureau of Statistics indices or equivalent foreign indices to be used for escalation over time).
• Risks encountered on the project such as risks that contribute to cost & time overruns and any contractor response to the risks.

The analysis should then list for each risk or group of risks,

• A description of the risks the project encountered
• the schedule, cost and other impact of each
• As best you can discover, what caused the impact and what could or should have been done to treat (mitigate, avoid, transfer etc) the risk.

References are to be acknowledged in an appendix and cross referenced to the text.

This assignment is to be prepared and submitted by individual students. Although you may discuss this assignment with other students the work must be your own without receiving undue assistance.

The Swinburne University policy on plagiarism applies to this assignment and students are required to submit work which is of their own making. Undue assistance from current or past students work includes the application of ‘templates’ from that students work.

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CSM80001 Project Costing – Final Assignment

Assignment Submission Requirements:

This assignment is due Monday 6th November, 2017. 12:00 noon.

The assignment is to be submitted by the deadline in both hard copy and electronic format.

• Hard copy is to be delivered to the CSM80001 mailbox located on Level 7 of the ATC building, near office ATC743
• Electronic copy of all files including supporting documents and the schedule are to be uploaded via the Assignment’ section of Blackboard before the closing time.

Assignment Marks:

Marking Scheme:

42.0%   Exec Summary & Advice to board

30.0%    Report

28.0%    Projects

References:

Cost Engineering for Project Success, an Australian Perspective, L J Pole 2013

Microsoft Project – 60 Day free trial software:

MS Project 2010 will not function effectively in its’ “out of the box” downloaded form. The MSP2010 software is much more user friendly when you upload and open the Eastwood Harris MSP2010 Template Ver03 which provides a Quick Access Toolbar. (Refer to the files provided in the Final Assignment section of Blackboard).

Manuals and learning material for MS Project 2010:

Ctrl + click to follow the link to the Swinburne Library ‘e’ book version.

Planning and Scheduling Using Microsoft Project 2010 by

2017_CSM80001_FinalAssn.docx

CSM80001 Project Costing – Final Assignment