PROJECT MANAGEMENT CONSTRUCTION PROJECT.
Outline Delivery Plan
The client has completed negotiations to acquire the site and have also reached an ‘understanding’ with the local council with regards to scope and context for a planning application to be made.
It is expected that the project will be delivered in a series of phases:
The English League ice hockey season is scheduled to start in September 2024 with the first league game for Ice Storm expected to be on either Saturday 28 or Sunday 29 September, the fixture list having not yet been confirmed.
Financial Arrangements
Arena Development’s accounting year runs from 1 January to 31 December.
In accordance with their operating procedures, all costs for the project from 1 January 2022 until launch are regarded as a ‘project cost’ and therefore accounted for in the project budget and considered an expense in the business case.
Costs incurred to the end of December 2021 are not included, they will be funded as a business development expense.
The cost of purchasing the site will be £17.5 million, payable on the last day of March 2022.
Funding
A consortium of investment banks has agreed to fund the project in its entirety. Repayments of £27.5 million fall due on 1 January 2023 and for 4 years thereafter as five equal ‘tranches’.
Consultancy Team
The core consultancy team will be engaged for the duration of the project, commencing on 1 January 2022 until the end of the ‘soft launch’. Their fees will be £63,375 per month inclusive of expenses and disbursements.
In addition, specialist resources engaged via an employment agency will be deployed to the project site as follows:
These staff will be expected to work a 5 day 40 hour week and will have four weeks leave per year, for which they will not get paid.
Staff will receive £150 per week expenses, except for the administration assistant who will receive £50 per week.
Office accommodation for the site team in nearby offices will cost £650 per week inclusive of utilities and other expenses.
Remediation and Construction Costs
Remediation costs including site security and demolition are expected to be £18,500,000.
Arena construction costs, including site security and commissioning are expected to be £76,000,000.
Costs for concession areas will be borne by the retailers / operators concerned.
Operating Income (Revenue) Stream
Whilst there will be a small income resulting from the events to be held during the ‘soft launch’ period, these will be off-set by the small audience numbers involved and the additional costs of test management and evaluation as well as disruption to events such as test evacuation and response exercises. Phase 5, therefore is expected to be “cost neutral” with income equal to expenditure and no impact on the project budget.
Thereafter, incomes are expected to show growth as follows:
Assignment Task One Project Planning
1a. Using the data in the scenario, prepare a Gantt chart for the entire programme from inception to the end of the ‘soft launch’. You may assume the project start date is Monday 10 January 2022.
1b. Compile a detailed network diagram and Gantt chart for the Arena construction phase (phase 3). You should allow in your programme for a two week shutdown of construction activity over the year-end holiday period.
1c. Identify the critical path for the construction phase.
1d. Re-present key data in Table 3 to show task durations using Eli Goldratt’s Critical Chain approach. Show also the safety buffer for the phase as a whole. Determine how buffer time should be used either at key milestones within the construction phase or only at the end clearly stating the reasons for your choice.
1e Present a simple Gantt chart to show the critical chain approach and the buffer distribution you have selected to use.
20 marks
Assignment Task Two Budgets and Cost Planning
2a. Using the data in the scenario, prepare a fully itemised cost plan for the project to include the provision of contingencies.
2b. Determine a basis for the provision of contingency within the cost plan .Make a clear recommendation, stating your reasoning.
10 marks
Assignment Task Three Project Appraisal
3a. Using the budget you prepared in task two with the income streams provided in the scenario, prepare an itemised cash flow for the project for the period 2022 to 2029 inclusive. You should consider the payment profiles for both the remediation phase (phase 2) and the main arena construction phases (phases 3 and 4). You will also need to include an estimate for the revenue receipt in Q4 2024, stating your reasoning for the figure you have chosen.
3b. Using the cash flow data, prepare an initial project appraisal and identify the Payback Period; Return on Capital (RoC); and Net Present Value of the project to support a business case for presentation to the client’s Board. Use a discount rate of 4% per annum.
3c. State any assumptions made and the commercial implications of the results presented including an accept / reject recommendation for the project as a whole. 15 marks