One project, connected decisions.

This connected final case asks students to follow one international project from selection and contracting through staffing, scheduling, budgeting, performance analysis, and closure. The public portfolio version omits course-administration details while preserving the instructional sequence, questions, and data.

Project Selection

Franklin Equipment, Ltd. (FEL), headquartered in Saint John, New Brunswick, was founded 75 years ago to fabricate large, custom-designed machines for construction companies in the Maritime Provinces. Over time, FEL focused its product lines on rock-crushing equipment for dam and highway construction and other markets that require aggregate processing. FEL now designs, fabricates, and assembles stationary and portable rock-crushing plants. It also services its own products and those of its competitors.

In the 1970s, FEL began expanding its market from the Maritime Provinces to the rest of Canada. The company now operates several offices and fabrication facilities throughout the country. More recently, FEL has made a concerted effort to market its products internationally. FEL is considering two projects: one in Dubai and one in Abu Dhabi. Assume that the required rate of return is 18%. The following tables present the estimated cash inflows and outflows:

Question 1

Which project should the company select if its criterion is the highest net present value (NPV)? Show the annual calculations and total NPV for each option, and state your recommendation.

Contract Negotiation

Assume that FEL selected one of the projects. The company then enters negotiations for a contract to design and fabricate a rock-crushing plant for the Middle Eastern construction project. Charles Gatenby led the negotiations and has been assigned as the project manager. FEL views this project as a major opportunity because the company has long wanted to enter this market. FEL has also struggled to persuade prospective customers that it is a Canadian company rather than a U.S. company. These customers tend to view all North American vendors as the same and may hesitate to employ them because of international political considerations.

Question 2

Would you recommend that Gatenby pursue a fixed-price contract or a cost-based contract? Justify your recommendation.

International Project Member Training

Assume that Gatenby successfully completed the negotiations and the contract has been signed. A project of this scope typically begins with selecting managers to oversee the product's design, fabrication, delivery, and installation. This selection matters because product design and fabrication vary according to each customer's needs. Terrain, rock characteristics, weather conditions, and logistical concerns can create distinct challenges during every phase of plant design and operation. Environmental concerns and labor conditions also vary by customer and region.

In addition to the project manager, each project team includes a design engineer; an operations manager, who oversees fabrication and on-site assembly; and a cost accountant, who oversees financial and cost reporting. These managers must work closely together to deliver a reliable plant on time and within budget. Because international contracts often require FEL to employ host-country nationals for plant assembly and train them to operate the plant, the project team also includes a human resource manager. This manager must understand the plant specifications, use that knowledge to design selection procedures and assess training needs, and learn the relevant labor laws in the customer's country.

FEL assigns managers to project teams according to their expertise, availability, and existing commitments. Managers with lighter current workloads are typically assigned to new projects. For example, a manager completing one project will likely receive a management role on a new project team. The project manager usually has little influence over who joins the team.

Because Gatenby secured the project and established positive working relationships with the regional customer, FEL assigned him as project manager. He has successfully managed similar projects. The other team members are Bill Rankins, a highly capable design engineer; Rob Perry, the operations manager responsible for fabrication and installation; Elaine Bruder, the finance and cost accounting manager; and Sam Stonebreaker, the human resource manager. Each manager has worked with the others on several previous projects.

During an initial Zoom call with Sam Stonebreaker, the human resource manager, the group discussed several issues, including training options for prospective employees. The participants immediately disagreed about three approaches: information-giving, affective, and experiential training. Gatenby must make the final decision.

Question 3

Considering the international context and a time limit of approximately one month, which of the three training approaches should Gatenby select? Justify your recommendation based on the available time and relevant international environmental factors, including economic, legal, geographic, cultural, infrastructure, and security considerations.

Team Building and Conflict Management

Assume that Gatenby selected the training method. The project team must now begin early team-building activities. Several years ago, FEL began contracting with consulting firms for facilitation services to help new project teams work effectively. Last month, FEL recruited Carl Jobe from one of these firms as a full-time internal consultant. Several managers, including Gatenby, were impressed by Jobe's skills and persuaded FEL's senior management to hire a permanent internal facilitator. Jobe was the clear choice.

Because Gatenby helped bring Jobe to FEL, he was eager for Jobe to facilitate team building among the Project Abu Dhabi team members. Gatenby took pride in securing the project and had expected to become its project manager. He knew that the project's success would significantly affect his career.

Gatenby told Jobe, “This project is really important to FEL and to me personally. I really need for you to help us develop into a team that works well together to achieve the project’s goals within budget. I’ve observed your success in developing teams on other projects, and I expect you’ll do the same for Project Abu Dhabi. I’ll take care of you if you help me make this work.”

Jobe explained how he would proceed. He would begin by interviewing team members individually to understand their perceptions of one another and their views of the project's opportunities and risks. He would then use the information from those interviews in full-team meetings designed to establish a shared identity and vision.

Jobe interviewed Bruder first. She expressed doubt that the project would succeed. During the interview, she seemed distant, and Jobe struggled to establish rapport with her. Bruder suggested that she expected substantial cost overruns and missed production deadlines. Because she did not know Jobe well, however, she hesitated to identify specific barriers to the project's success. Although she did not say so directly, Jobe concluded that she did not want to participate in Project Abu Dhabi. He left the interview confused about what was happening.

Jobe’s next interview was with Perry, the operations manager. Perry has worked at FEL for 15 years, and he immediately came to the point: “This project is not going to work. I cannot understand why upper management keeps assigning me to work on projects with Rankins. We simply cannot work together, and we don’t get along. I’ve disliked him from day one. He keeps dropping the fact that he has earned all these advanced degrees from Purdue. And he keeps telling us how things are done there. I know he’s better educated than I am, and he’s really smart. But I’m smart, too, and am good at what I do. There’s no need for Rankins to make me feel like an idiot because I don’t have a degree. Jobe, I’ll be honest with you. Rankins has only been here for five years, but I hold him personally responsible for my problem with alcohol, and for its resulting effect on my marriage. I got divorced last year, and it’s Rankins’s fault.”

Jobe next talked with Rankins, who said, “I don’t care what you do. Perry and I simply can’t work closely together for the nine months it will take to get it done. One of us will kill the other. Ever since I arrived at FEL, Perry has hated my guts and does everything he can to sabotage my designs. We usually worry about customers creating change orders; here it’s the fabrication and operations manager who is responsible for them. Perry second-guesses everything I do and makes design changes on his own, and these are always bad decisions. He is out of control. I swear he stays awake at nights, thinking up ways to ruin my designs. I don’t have this problem with any other manager.”

Jobe left the interviews discouraged and wondered what Stonebreaker might say. Stonebreaker, however, was positive:

Jobe asked Stonebreaker about the ability of various team members to work together. Stonebreaker replied, “No problem! We’ve all worked together before and have had no problems. Sure, there have been ruffled feathers and hurt feelings between Rankins and Perry. Rankins can be arrogant and Perry stubborn, but it’s never been anything that we couldn’t work around. Besides, both of them are good at what they do—both professionals. They’ll keep their heads on straight.”

Jobe became even more bewildered. Gatenby said that the project's success depended on Jobe's facilitation skills. The finance manager appeared to want to leave the project team. The design engineer and operations manager admitted that they detested each other and could not work together. Yet the human resource manager, who had previously worked with Perry and Rankins, expected a productive relationship and anticipated no problems.

Jobe met with Gatenby a second time. Before discussing the team-building sessions, Jobe asked how Gatenby assessed the team members' ability to work together. Gatenby acknowledged the longstanding hostility between Perry and Rankins but added:

Their conversation ended as follows:

Jobe:

“Why do you expect Rankins and Perry to work well together, given their history? What incentives do they have to do so?”

Gatenby:

“As you should know, FEL requires formal goal setting between project managers and functional managers at the beginning of each project. I’ve already done this with Bruder, Stonebreaker, Perry, and Rankins. Perry and Rankins have explicit goals stating they must work well together and cooperate with each other.”

Jobe:

“What happens if they do not meet these goals?”

Gatenby:

“I’ve already discussed this with top management. If it appears to me after two months that things are not working out between Perry and Rankins, FEL will fire Rankins.”

Jobe:

“Does Perry know this?”

Gatenby:

“Yes.”

Question 4

What should Jobe recommend to Gatenby? Address each of the following issues:

• Possible changes to FEL's staffing policy.
• Whether to begin the project with both Perry and Rankins on the team.
• Whether to reassign Perry, Rankins, or both.
• Whether to dismiss Rankins and what message that decision would send.

Support your argument with the team members' perspectives, concepts from the relevant chapter, and other contextual information from the case.

Project Network Diagram

Assume that FEL resolved the staffing issues based on your recommendations. It is now time to plan project implementation. Gatenby begins by listing the required activities, their durations in months, and their predecessors.

Question 5

Complete the following tasks:

• Create an activity-on-node (AON) project network diagram.
• Complete the forward and backward passes. Calculate the earliest start (ES), latest start (LS), earliest finish (EF), latest finish (LF), total slack, and free slack for each activity.
• What is the critical path?
• What is the total duration of the project?
• Create a Gantt chart and show the slack for each noncritical activity.

Time-Phased Baseline Budget

Gatenby next develops the time-phased budget using the following monthly cost breakdown. He notices that these figures differ from the estimates used in the NPV calculations. After consulting Elaine Bruder, the finance and cost accounting manager, he agrees to use the following figures. You do not need to revise your previous answers.

(Amounts are in thousands of dollars.)

Question 6

Develop the baseline budget. Show the total budget for each activity and the cumulative budget at the end of each period. (Hint: The textbook, instructor videos, and practice exercises include examples of baseline budget tables.)

Status Reports

Over eight periods, Gatenby receives the following completion percentages and actual costs (AC) for each activity:

Question 7

7.1 Develop status reports for Periods 1 through 8 (eight tables).

7.2 Complete the performance index table.

7.3 Calculate EACf and VACf. Based on your results, what is the project's current status, and what will its expected status be at completion?

(Hint: The textbook, instructor videos, and practice exercises include examples of the required tables and key performance indicators.)

Performance Index Summary

Remaining Activities (Extra Credit)

After meeting with the project team, Gatenby receives the following revised estimates for the remaining work:

• Activity F (Fabricate machinery) will be completed at the end of period 12 at a total cost of $500,000.
• Activity G (Assemble machinery) will be completed at the end of period 10 at a total cost of $150,000.
• Activity H (Install machinery) will be completed at the end of period 14 at a total cost of $200,000.

Question 8

8.1 Calculate EACre and VACre. Based on the revised estimates, what is the project's expected cost and schedule status?

8.2 Which estimate would you trust more, VACf or VACre? Explain your reasoning.

Project Closure

The project is complete, and Gatenby plans to conduct a project audit. One manager questions whether such an audit can be objective, while another questions whether it is necessary, stating, “We did all of the performance measurement control. Can you tell me what’s the difference between a project closure review/audit and performance measurement control?”

As the final part of this project, help Gatenby answer these questions.

Question 9

9.1 How does a project closure review differ from a performance measurement control system?

9.2 Why is it difficult to perform a truly independent, objective review?