## Problems

14-1 How does a project manager price out a job in which the specifications are not prepared until the job is half over?

14-2 Beta Corporation is in the process of completing a contract to produce 150 units for a given customer. The contract consisted of R&D, testing and qualification, and full production. The industrial engineering department had determined that the following number of hours were required to produce certain units:

Hours Required Per Unit 100 90 80 70 65 60 55 50

Plot the data points on regular graph paper with the Y- axis as hours and the X-axis as number of units produced.

Plot the data points on log-log paper and determine the slope of the line.

Compare parts a and b. What are your conclusions?

How much time should it take to manufacture the 150th unit?

How much time should it take to manufacture the 1,000th unit? Explain your answer. Is it realistic? If not, why?

As you are producing the 150th unit, you receive an immediate follow-on contract for another 150 units. How many manufacturing hours should you estimate for the follow-on effort (using only the learning curves)?

Let's assume that industrial engineering determines that the optimum number of hours (for 100 percent efficiency) of manufacturing is forty-five. At what efficiency factor are you now performing at the completion of unit number 150? After how many units in the follow-on contract will you reach the optimum level?

At the end of the first follow-on contract, your team and personnel are still together and performing at a 100 percent efficiency position (of part g). You have been awarded a second follow-on contract, but the work will not begin until six months from now. Assuming that you can assemble the same team, how many man-hours/unit will you estimate for the next 150-unit follow-on?

You are now on the contract negotiation team for the second follow-on contract of 150 units (which is not scheduled to start for six months). Based on the people available and the "loss of learning" between contracts, your industrial engineering department estimates that you will be performing at a 60 percent efficiency factor. The customer says that your efficiency factor should be at least 75 percent. If your company is burdened at \$40/hour, how much money is involved between the 60 and 75 percent efficiency factors?

What considerations should be made in deciding where to compromise in the efficiency factor?

14-3 With reference to Figure 14-10, under what conditions could each of the following situations occur:

a. Program manager and program office determine labor hours by pricing out the work breakdown structure without coordination with functional management.

b. Upper-level management determines the price of a bid without forming a program office or consulting functional management.

c. Perturbations on the base case are not performed.

d. The chief executive officer selects the program manager without consulting his directors.

e. Upper-level management does not wish to have a cost review meeting prior to sub-mittal of a bid.

14-4 Can Figure 14-20 be used effectively to price out the cost of preparing reports?

14-5 Answer the following questions with reference to Figure 14-10.

a. The base case for a program is priced out at \$22 million. The company's chief executive officer is required to obtain written permission from corporate to bid on programs in excess of \$20 million. During the price review meeting the chief executive states that the bid will be submitted at \$19.5 million. Should you, as program manager, question this?

b. Would your answer to part a change if this program were a follow-on to an earlier program?

c. Proposals normally consist of management, technical, and cost volumes. Indicate in Figure 14-10 where these volumes can go to press, assuming each can be printed independently.

14-6 Under what kind of projects would each of the following parameters be selected:

a. Salary escalation factor of 0 percent.

b. Material termination liability of 0 percent or 100 percent.

c. Material commitments for twenty months of a twenty-four-month program.

d. Demanning ratio of 0 percent or 100 percent of following months' labor.