1.Use the following information to answer parts a
through h. Describe what the results of each calculation
mean to you as a project manager. What
do you propose to do?
PV $25,000
EV $30,000
AC $29,000
BAC $1,000,000
a. Schedule variance (SV)
b. Cost variance (CV)
c. Schedule performance index (SPI)
d. Cost performance index (CPI)
e. Estimate to complete (ETCfirst method)
f. Estimate to complete (ETCsecond method)
g. Estimate at completion (EAC)
h. To-complete performance index (TCPI)
2.For a cost savings project, you have captured data
that show the following costs: delays between
operations = $900; broken/missing tools =
$1,200; water losses = $3,700; poor seals =
$1,500; other = $2,000. Construct a Pareto chart.
What would your next course of action be?
CaSe STUDy 13.2
The Superconducting Supercollider
Conceived in the 1980s as a device to accelerate particles
in high-energy physics research, the Superconducting
Supercollider (SSC) was a political and technical hot
potato from the beginning. The technical challenges associated
with the SSC were daunting. Its purpose was to
smash subatomic particles together at near the speed of
light. That would require energy levels of 40 trillion electron
volts. Using the physics of quantum mechanics, the
goal of the project was to shed light on some of the fundamental
questions about the formation of the universe.
The SSC was designed to be the largest particle accelerator
ever constructed, far bigger than its counterpart at
Fermi Laboratory. In order to achieve these energy levels,
a set of 10,000 magnets was needed. Each of the magnets,
cylindrical in shape (1 foot in diameter and 57 feet long),
would need to operate at peak levels if the accelerator
were to achieve the necessary energy levels for proton
collision. The expected price tag just for the construction
of the magnets was estimated at $1.5 billion.
The technical difficulties were only part of the overall
scope of the project. Construction of the SSC would be
an undertaking of unique proportions. Scientists determined
that the accelerator required a racetrack-shaped
form, buried underground for easier use. The overall
circumference of the planned SSC required 54 miles of
tunnel to be bored 165 to 200 feet underground. The initial
budget estimate for completing the project was $5
billion, and the estimated schedule would require eight
years to finish the construction and technical assemblies.
The SSCs problems began almost immediately
after President Reagans 1988 kickoff of the project. First,
the public (including Congress) had little understanding
of the purpose of the project. A goal as nebulous as
particle acceleration for high-energy physics was not
one easily embraced by a majority of citizens. The original
operating consortium, URA, consisted of 80 public
and private American research centers and universities,
but it was expected that European and Asian scientists
also would wish to conduct experiments with the SSC.
Consequently, the U.S. Department of Energy hoped to
offset some of the cost through other countries. While
initially receptive to the idea of participating in the
project, these countries became vague about their levels
of contribution and time frame for payment.
Another huge problem was finding a suitable location
for the site of the SSC. At its peak, work on the SSC
was expected to employ 4,500 workers. Further, once
in full-time operation, the SSC would require a permanent
staff of 2,500 employees and an annual operating
budget of $270 million. Clearly, it was to almost every
states interest to lure the SSC. The result was a political
nightmare as the National Research Council appointed
a site review committee to evaluate proposals from 43
states. After making their judgments based on a series
of performance and capability criteria, the committee
narrowed their list to eight states. Finally, in late 1988,
the contract for the SSC was awarded to Waxahachie,
Texas, on a 16,000-acre tract south of Dallas. While
Texas was thrilled with the award, the decision meant
ruffled feathers for a number of other states and their
disappointed congressional representatives.
The final problem with the SSC almost from the
beginning was the mounting federal budget deficit,
which caused more and more politicians to question
the decision to allocate money at a time when Congress
was looking for ways to cut more than $30 billion from
the budget. This concern ended up being a long-term
problem, as the SSC was allocated only $100 million for
1989, less than one third of its initial $348 million funding
request. Budget battles would be a constant refrain
throughout the SSCs short life.
Work proceeded slowly on the Waxahachie site
throughout the early 1990s. Meanwhile, European financial
support for the project was not forthcoming. The
various governments privately suspected that the project
would never be completed. Their fears were becoming
increasingly justified as the cost of the project continued
to rise. By 1993, the original $5 billion estimate had
ballooned to $11 billion. Meanwhile, less than 20% of
the construction had been completed. The process was
further slowed when Congress began investigating
expenditures and determined that accounting procedures
were inadequate. Clearly, control of the projects
budget and schedule had become a serious concern. In a last desperate move to save SSC funding,
Energy Secretary Hazel OLeary fired URA as prime
contractor for the construction project. There was talk
of replacing URA with a proven contractorMartin
Marietta and Bechtel were the two leading candidates.
By then, however, it was a case of too little, too late.
Costs continued to climb and work proceeded at such
a snails pace that when the 1994 federal budget was
put together, funding for the SSC had been removed
entirely. The project was dead. The nonrecoverable costs
to the U.S. taxpayer from the aborted project have been
estimated at anywhere between $1 billion and $2 billion.
Few questioned the governments capability to
construct such a facility. The technology, though leading-
edge, had been used previously in other research
laboratories. The problem was that the pro- and anti-
SSC camps tended to split between proponents of
pure research and those who argued (increasingly
swaying political support their way) that multibillion-
dollar research having no immediate discernible
impact on society was a luxury we could not afford,
particularly in an era of federal budget cuts and hard
choices. The SSC position was further weakened
by the activities of the research consortium supervising
the project, URA. Its behavior was termed
increasingly arrogant by congressional oversight
groups that began asking legitimate questions about
expenditures and skyrocketing budget requests. In
place of evidence of definable progress, the project
offered only a sense of out-of-control costs and poor
oversightclearly not the message to send when
American taxpayers were questioning their decision
to foot a multibillion-dollar bill.17
Questions
1. Suppose you were a consultant called into the
project by the federal government in 1990, when
it still seemed viable. Given the start to the project,
what steps would you have taken to reintroduce
some positive spin on the Superconducting
Supercollider?
2. What were the warning signs of impending failure
as the project progressed? Could these signs
have been recognized so that problems could
have been foreseen and addressed or, in your
opinion, was the project simply impossible to
achieve? Take a position and argue its merits.
3. Search for superconducting supercollider on the
Internet. How do the majority of stories about the
project present it? Given the negative perspective,
what are the top three lessons to be learned from
this project?
CaSe STuDy 14.1
New Jersey Kills Hudson River Tunnel Project
When dignitaries broke ground on the Access to the
Regions Core (ARC) project in northern New Jersey in
2009, it was supposed to be a celebration to signal the
start of a bright new future. Creating a commuter rail
tunnel under the Hudson River was not a particularly
new or difficult idea, but it was viewed as a critical
need. The project was first proposed in 1995, and every
New Jersey governor after that time had publicly supported
the need for the tunnel. The reasons were compelling:
The entire commuter rail system connecting
New York and New Jersey was supported by only one
congested 100-year-old, two-track railroad tunnel into
an overcrowded Penn Station in midtown Manhattan;
both tracks had reached capacity and could no longer
accommodate growth. Passengers were making more
than 500,000 trips through Penn Station every day,
with station congestion and overcrowding the norm.
The project was especially critical for New Jersey residents
because their commuter ridership to New York
had more than quadrupled in the past 20 years from
(continued) 10 million annual trips to more than 46 million annual
passenger trips. In the peak hours, the New Jersey
Transit Authority operated 20 of the 23 trains heading
into or out of New York. Building the ARC would double
the number of New Jersey Transit commuter trains,
from 45 to about 90, that could come into Manhattan
every morning at rush hour.
In the face of such congestion and perceived
need, the ARC project was conceived to include the
following elements:
Two new tracks under the Hudson River and the
New Jersey Palisades
A new six-track passenger station, to be known
as New York Pennsylvania Station Extension
(NYPSE) under 34th Street, with passenger connection
to Penn Station
A new rail loop near the Lautenberg Secaucus
Junction station to allow two northern New
Jersey line trains access to New York City
A midday rail storage yard in Kearny, New Jersey
Proponents also argued the environmental advantages
of the project, noting that the ARC project would eliminate
30,000 daily personal automobile trips, taking
22,000 cars off the roads and resulting in 600,000 fewer
daily vehicle miles traveled. The project was expected
to thus reduce greenhouse gas emissions by nearly
66,000 tons each year.
The ARC project was anticipated to take eight
years to complete, coming into service in 2017. The
cost of the project was significant, as the Federal
Transit Administration (FTA) reported the project cost
as $8.7 billion in their Annual Report. In order to share
the burden of the project costs, the funding as originally
proposed included the following sources:
Federal government: $4.5 billion
Port Authority of New York and New Jersey:
$3.0 billion
New Jersey Turnpike Authority: $1.25 billion
A final important feature of the funding plan limited
the exposure of the federal government for any
project overruns, meaning that the government was
locked into its original commitment amount only. Any
cost overruns or project slippages would have to be
covered exclusively by the state of New Jersey.
The contracts for various parts of the project
began to be awarded following competitive bidding
in June 2009, and the first tunneling contract was
awarded in May 2010. Within little more than three
months, rumbles began being heard from the New
Jersey governors office on the viability of the project.
Governor Chris Christie ran and was elected on
the promise of reining in what many viewed as outof-
control spending by the states legislature, coupled
with some of the highest property and business taxes
in the country. As a self-described budget hawk,
Christie was increasingly troubled by rumors of cost
overruns in the ARC project. Worse, all projections for
completion of the project pointed to a much higher
final price tag than the original $8.7 billion estimate.
In early September 2010, Governor Christie
ordered a temporary halt in awarding new contracts
for the project until his office had a chance to study
project cost projections more thoroughly. This issue
was highlighted when U.S. Transportation Secretary Ray LaHood, though a supporter of the tunnel, publicly
admitted that federal estimates showed the project
could go between $1 billion and $4 billion over
budget. Christie suspected that even those estimates
might be low, putting his state on the hook for a
potentially huge new debt, at a time when the economy
was sour and the state was already desperately
seeking means to trim runaway spending. As additional
evidence of highly suspect initial cost estimates,
Christies supporters pointed to the recently completed
Big Dig project in Boston, which started with
an initial price tag of $2.5 billion and ultimately ended
up costing well over $14 billion to complete.
Governor Christie first canceled the contract on
October 7, 2010, citing cost overruns for which he said
the state had no way to pay. The following day, he
agreed to temporarily suspend his cancellation order
so that he could try to resolve the funding dilemma
with federal transportation officials and other project
stakeholders. After a two-week period to analyze all
their options, the governor made the cancellation official.
Christie said that given the impact of the recession
and the probability of continuing cost overruns,
the state could no longer afford the tunnels escalating
costs. More than a half-billion dollars had already been
spent on construction, engineering, and land acquisition
for a project that was budgeted at $8.7 billion, but
which the governor said could go as high as $14 billion.
The only prudent move is to end this project,
Governor Christie said at a Trenton news conference.
I cant put taxpayers on a never-ending hook.30
Questions
1. How would you respond to the argument that it
is impossible to judge how successful a project
like this one would have been unless you actually
do it?
2. Take a position, either pro or con, on Christies
decision to kill the ARC. Develop arguments to
support your point of view.
3. In your opinion, how clearly must a large infrastructure
project like ARC have determined its
need, costs, and so forth before being approved?
If the criteria are too stringent, what is the implication
for future projects of this type? Would any
ever be built?
Students should incorporate outside resources into their paper. A minimum of five (5) outside sources will need to be referenced. The Final Course Paper should be approximately 10-12 pages with at least five (5) outside references.
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