Analysis of a major project

Students are required to analyse a significant business project, and apply a range of project management tools and techniques.

 

Students have the choice between basing their analysis on a real business project (if this is available to them), or using the Oil project scenario (below) as the basis for their work.

 

If students prefer to use a real project, then it is expected that all the following tools and techniques are applied:

 

  • Planning (critical path analysis)
  • Resource analysis
  • Risk analysis and management
  • Costing and budgeting
  • Progress tracking and variance analysis (preferably using EVM)

 

For the Oil scenario, a range of specific questions are set out.

 

In either case, students are expected to use Microsoft Project (and Excel) where applicable to develop various analyses, and demonstrate proficiency with the software to a professional level.

 

A formal project report document (created in Microsoft Word) is required from each student.   Guidance as to format, structure, contents etc. will be provided during the module.

 

With respect to the work done with Microsoft Project, do not submit any MS Project files, but instead include screenshots from MS Project within your report document. Guidance will be provided on the best ways to achieve this.

 

Format:  Business report document

 

Word limit:  4,000

Assessment criteria: see grading criteria

 

Oil Engineering

 

The information based upon this invented business organisation is purely fictitious and has been prepared solely for an academic case study.  Any resemblance to companies, structures, roles, events, persons or information included is purely coincidental.

 

It should be noted that no engineering or technical knowledge is required.

 

Background

 

Oil Engineering is a marine and offshore construction company with several decades of experience in the design, manufacture, commissioning and delivery of modules for offshore oil, gas and renewable energy installations.  It operates out of a large fabrication yard on the North East coast of England.

 

The company’s advanced engineering and construction facilities allow them to offer tailor-made solutions that are highly competitive with other companies in this market. Over the years numerous modules have been designed and built for a variety of different oil and gas companies.

 

After some intense competition, Oil has recently won a major contract from Pretoria Oil to build the topsides module for a new offshore production platform for delivery in September 2018. The fixed price of the contract was finalised as being £59.5m.  The Oil bid was based on a detailed design specification provided to all the bidders by Pretoria Oil.

 

Oil are currently very busy with work for other clients and will not be able to start this new project work for Pretoria Oil until 2018.

 

Aware of this, Pretoria Oil, insisted on a penalty clause being inserted into the contract:

Delivery of the completed module must take place no later than Friday 21 September 2018.  For every day (or part day) that the project is late (including weekends), Oil must pay Pretoria Oil liquidated damages of £1 million.

 

A team of engineers working for Pretoria Oil would also be present at the Oil fabrication yard to supervise onshore commissioning – the intensive testing of the entire module before it was transported from the Oil fabrication yard to the offshore location.  Eight weeks was allowed for this work (Task N in Table 1), and if any problems were detected, then delays could occur because Pretoria would be entitled to demand that the faults were rectified on the spot before the module was acceptable to them. Oil were accustomed to working with their clients in this manner.

 

Part 1    Parameters and risks

 

(a)          Discuss the relative importance of the various iron triangle parameters that will need to be managed by the Oil project manager over the course of the project, and how they may inter-relate to each other. (15 marks)

 

(b)          Use the template provided to create a risk register, identify and analyse a maximum of ten risks that Oil would be facing with a large fabrication project of this nature. (10 marks)

 

Part 2    Planning and costs

 

In preparation for the forthcoming work, the Oil project manager created the following data in Table 1:

 

Task Description Duration (weeks) Predecessor/s Fixed costs Number of engineers Number of technicians
A Fabricate upper deck 4 8.3 10 45
B Fabricate cellar deck 2 7.1 12 56
C Turbine generators 6 A 2.5 8 20
D Fuel gas systems 2 B 2.8 6 22
E Fabricate flare boom 4 B 3.9 8 32
F Cooling systems 8 C 4.5 12 18
G Seawater pumping systems 12 C 2.5 12 20
H Connect both decks 2 C,D 3.1 10 46
I Install flare boom 6 E,H 2.2 8 35
J Coalescer systems 4 F 2.2 7 14
K Gas dehydration systems 4 J 2.7 7 10
L Water injection systems 6 G,H 3.1 6 12
M Gas compression systems 6 I 3.2 6 14
N Onshore commissioning 8 K,L,M 1.1 12 24

 

Table 1 – project plan

 

The average (fully inclusive) cost of an engineer was estimated to be £59.00 per hour and for a technician £36.00 per hour. The company generally works a standard five day week and eight hour days. The fixed costs for each task are shown in Table 1 are in £m.

 

(a)          Using Microsoft PowerPoint (or any similar graphics package) prepare a network diagram showing the critical path and planned duration of the project. Quantify the float on the non-critical tasks. (10 marks)

 

(b)          Using Microsoft Project (or a similar package) prepare a Gantt chart for the project to a professional standard. Calibrate the timescale in weeks. If the project is scheduled to start on Monday 8 January 2018 determine the planned completion date based on the critical path analysis. (8 marks)

 

(c)           Using the information provided, calculate the projected gross profit for the contract (i.e. revenue – costs) that Oil will be aiming to achieve from this project.  Show your workings clearly. (7 marks)

 

Part 3    Tracking progress and spending

 

The project started on time, and after 16 weeks of work, an intensive review of the project was held on Monday 30 April 2018 at the Oil fabrication yard. The following information was reported by the project team.

 

Task Actual progress to date (%) Total expenditure incurred to date (£m)
A 100 8.15
B 100 7.2
C 100 2.56
D 100 3.18
E 100 4.43
F 75 4.29
G 35 1.67
H 90 4.03
I 20 0.78

No other tasks had started yet or incurred any expenditure.

 

Table 2 – actual progress and spending after 16 weeks

 

(a)          Firstly make a copy of the Gantt chart for the project created in part (b).  Using the Gantt chart, determine the planned progress (%) for each task after 16 weeks had elapsed. Assume that progress is achieved on a linear basis for each task. For example if a task is planned over the course of 4 weeks, then if 3 weeks have elapsed planned progress would be 75%. (10 marks)

 

Secondly enter the actual progress values for progress from Table 2 into the Gantt Chart, and using Microsoft Project reschedule the project with effect from the review date. Comment on the outcome from a commercial perspective. (15 marks)

 

Part 4    Predictive outcomes and tactics

 

(a)          Create an Earned Value Analysis table showing ACWP, BCWP and BCWS values for every project task. Using EVA determine an overall planned % figure for the entire project and compare with an overall actual figure for the project. Show all workings in a neat and professional layout. (8 marks)

 

(b)

Lynda.com Tracking progress

Viewing progress

 

 

 

Create a projected completion date for the entire project using the Estimate at Completion (schedule) method derived from the Earned Value Analysis.

 

Create a projected final spend for the entire project using the Estimate at Completion (cost) method derived from the Earned Value Analysis. Show your calculations clearly

 

Compare these values with the original contract value to determine the likely profitability of the contract as it now stands. (8 marks)

 

Soon after the review, a day long meeting was convened to discuss possible tactics to accelerate progress and avoid the prospect of any penalty charges.  In response to urgent demands from the Chief Executive, the project manager had researched some acceleration options for the Directors to consider.

 

 

Task Option
K The design of the gas dehydration systems could be simplified leading to a faster installation process. This could save up to 2 weeks but at a cost of £80,000 per week
L An alternative vendor for the water injection systems could be selected for the project. This could save up to 4 weeks at a cost of £150,000 per week
M The vendor for the gas compression systems has offered to work over-time in order to accelerate the installation schedule. This option can save up to 3 weeks at a cost of £55,000 per week
N The Oil team required for onshore commissioning could be asked to work evenings and weekends. This would save up to 3 weeks at a cost of £75,000 per week

 

Table 3 – possible acceleration options

 

(c)           Recommend which of the options should be accepted and which should be declined. Explain and justify your recommendations with reference to the project plan and critical path.  If the recommended options are implemented successfully, analyse the commercial impact on the profitability of the project. (9 marks)