Answer Happy

Zapata Corporation is to construct a 25,000-seat stadium. Theconstruction must start onFebruary 15 and must be completed in a year. A penalty clause of$20,000 per week of delay iswritten into the contract.Emiliano Zapata, president of the company, called a planningmeeting. The director of humanresources stated that only slight delays might occur in a normalyear due to a shortage of labor.However, she reminded that the company would have to use onlyunionized labor for such aproject and the labor agreements were to expire on November 29.Past experience revealed thatthere is a fifty-fifty chance of a strike. The director estimatedthat such a strike would last either8 weeks (70 percent chance) or possibly 12 weeks (30 percentchance).The vice-president of engineering raised another issue; the weatherforecasts indicate thatDecember would be colder than usual. This factor was notincorporated into earlier estimatessince previous forecasts called for milder weather. Concretepouring in December might thusrequire in one out of every three cases special heating that costs$2,500 per week.There is also an overhead expense of $1,000 per week for theproject.The management team considered alternatives to cope with thesituation. Five proposals weresubmitted.1. Expedite the pouring of seat gallery supports. This would cost$20,000 and cut theduration of the activity to 6 weeks.2. Same as proposition 1, but in addition, put a double shift onthe filling of the field. A costof $10,000 would result in a 5-week time reduction.3. The use of three shifts and some overtime could cut 6 weeks ofthe roofing at anadditional cost of only $9,000.4. Do not take any special action
Technical Details:The project starts by clearing the site, an activity that lasts 8weeks. Once the site is clear, thework can simultaneously start on the structure itself and on thefield.The work in the field involves drainage which lasts 8 weeks,followed by filling for the playingfield and track. Only with the completion of the filling (14 weeks)can the installation of theplaying turf take place, an activity that is estimated to take 12weeks.The work on the structure itself starts with excavation followed bythe pouring of the concretefootings. Each of these activities takes 4 weeks. Next comes thepouring of supports for seatgalleries (12 weeks), followed by erecting pre-cast galleries (13weeks). The seats can then bepoured (4 weeks) and are ready for painting. However, the painting(3 weeks) cannot begin untilthe dressing rooms are completed (4 weeks). The dressing rooms canbe completed only afterthe roof is erected (8 weeks). The roof must be erected on a steelstructure which takes 4 weeksto install. This activity can start only after the concretefootings are poured.Once the roof is erected, work can start simultaneously on thelights (5 weeks) and on thescoreboard and other facilities (4 weeks). Assume that there are 28days in February andFebruary 15 falls on a Monday.1. Analyze the proposals and make recommendations based on expectedcosts.2. What would you recommend if you want to minimize the maximumpossible cost?3. What is the maximum amount of money you would be willing to payfor perfect advanceinformation on the strike and weather
W Date 1 Feb 15-21 22-28 8631SAW NIM 2 3 Mar 1-7 4 5 7 8 Apr 5-11 9 8-14 15-21 18 22-28 19 29-Apr4 20 12-18 19-25 10 11 12 May 3-9 13 W Date 14 May 17-23 15 16 10-16 W Date 27 Aug 16-22 28 24-30 31-Jun6 29 23 26-May2 24 17 Jun 7-13 14-20 21-27 32 28-Jul4 33 21 Jul 5-11 22 12-18 19-25 30 Sep 6-12 31 25 Aug 2-8 26 9-15 23-29 41 30-Sep5 42 34 Oct 4-10 35 11-17 36 26-Aug1 37 13-19 44 20-26 45 27-Oct3 46 18-24 25-31 W Date 40 Nov 15-21 22-28 29-Dec5 38 Nov 1-7 39 8-14 43 Dec 6-12 13-19 20-26 27-Jan2 47 Jan 3-9 48 49 10-16 17-23 24-30 31-Feb6 50 51 52 Feb 7-13