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Pellican Landing Bender Corporation

Question 1: In what ways are Corbett & Lawson partners? Adversaries? Answer: Lawson is City Planning Officer of Springfield. Corbett is Vice President, Bender Corporation. Both the parties are members of the project with strong common interests. Both wanted to develop the city (for different reasons).

Question 2: Interpret the case in terms of the four points of principles negotiation. Answer: 4 points of principles negotiations are: Separate the people from the problem Focus on interests, not positions Before trying to reach agreement, invent options for mutual gain Insist on using objective criteria

Separate the people from the problem Identification of issues for discussion Focus on interests, not positions Both the parties have a set of preferences and importance weights for each of the issues to be resolved E.g. On building inspector, focus on Fast Growth instead of individual person Parties should not hold to their subjective preferences and should move forward to the common interest of developing the city

Before trying to reach agreement, invent options for mutual gain More people are looking for homes near city. So both the parties are willing to develop residential complex in the city Developing a city that was ignored for long time

Insist on using objective criteria The issues were graded using the pointing system

Question 3 (a): Whether Corbetts estimate of the importance on each of the issues appears to have a win-win situation? Answer: The scores are ranging from -440 to 1720. Corbett should work out his minimum score (within the range) he would like to achieve in all issues. He should negotiate over and above that so that he is not completely lost. Anything above the minimum score is beneficial to him.

Question 3 (b): Should Mr. Corbett reveals his position to Mr. Lawson to speed up the negotiations and start of the project? Answer: Mr. Corbett can reveal his score to the other party subject to the following conditions: He should not reveal his minimum score. He can mark up the minimum score requirement and reveal it so that even in worst case he will not lose below his minimum requirement. This will help both the parties to negotiate around value revealed and finalize the deal.

Question 4: How would you suggest Mr. Corbett proceed with the negotiations? Answer: In the following ways Mr. Corbett would be suggested proceed with the negotiations. Which issues should be discussed first? Focus of negotiation to be a winwin situation. Professionals have interest in living and working and city. Professionals require apartments rather than condominiums. It matches with the interest of Corbett and hence will create a win win situation. So start with Condo/apartment ratio.

Which last? The issue of open space Because city planner would require more open space which is conflicting with the interests of Bender corporation

What position should Corbett take on each of the issues? For issue of condo/apartment ratio, take a position that ratio to be 1:3 Justified by starting the income levels of young professionals For issue of open space, take position in terms of interests like safety issues Can justify that higher level of safety can be ensured with lesser open space as less number of outsiders or non residents will enter into the area

Question 5: Consider one negotiation approach of coming to a strict compromise on each issue, resolved one at time. Would another approach such as considering two or more issues at once, offer a better solution to both the parties? Answer: Let us never negotiate out of fear. But let us never fear to negotiate.
President John F. Kennedy

One issue More systematic No interdependency Issues surface one by one Win/lose situation Order of issues discussed very important

Many issues Multiple options Trade off between issues for maximizing gains Can use a rating system Reduced chances of Dead lock and Fight

Pelican landing case Should go for many issues at once Lawson may not favor any inspector He may like to have more open space Trade off possible

Question 6: If all possible outcomes were plotted in 2D space with each axis being the sum of the results for each negotiator, what would the plot look like? What would the outer boundary represent? Answer:

Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Corbett (X-axis) Lawson (Y-axis) Numbers for Measure

City Financing 350 250 150 250 Retail Space 50 -10 -70 -190 -130 -70 Local Subcontractors 210 170 130 50 90 130 Open Space 290 230 170 50 110 170 Condo/ Apartment Ratio 370 290 210 50 130 210 Low/Moderate-Income units 130 110 90 0 70 90 Height 50 -100 -250 -550 -400 -250 Building Inspector 170 140 110 50 80 110 450 50

150 350 -130 -10 90 170 110 230 130 290 70 110 -400 -100 80 140

50 450 -190 50 50 210 50 290 50 370 0 130 -550 50 50 170

Complex but effective Assign issue priorities Score the outcomes Deal breakers

Case: Automotive Builders, Inc.: The STANHOPE project


Question 1: How did ABI handle forecast risk? Answer: The U.S. farm market will be a difficult battleground for world farm equipment manufacturers and any forecast of a particular engines potential in this market must be considered as particularly risky. Every effort should be made to minimize our exposure on this investment and maximize our flexibility. By following their business strategy guidelines: Long term margins, long term technical abilities position, advanced technology, utilize project champions, keep plants under 480 employees. Long term variability in purchased equipment. Investing versus non investing comparisons. Maximizing flexibility while minimizing exposure.

Question 2: Were ABIs Stanhope site costs in Table 2 derived by a top-down or bottom-up process? Why? Answer: Top down process: The cost estimates include past data based on similar activities Individual elements are lacking in each task, but the overall estimates are adequately developed to account for the entire project task Question 3: What are the answers to Steve Whites questions? Answer: A. Wont this investment simply dilute current ROI? Yes because of the $7.1 million investment for the project that will be depreciated over the 8 year life. Total company ROI will be negative for the first several years because of the startup costs and working capital required for the Stanhope project.

B. Will the cost in new equipment be returned by an equivalent reduction in labor? Where is the payoff? No. Although the equipment cost is high, the relative amount of labor necessary to run this technology will remain constant through time. The payoff is the through put by the new machines and the properly trained and experienced employees. C. What asset protection is there? The asset protection comes in the variability of the equipment to produce several other types of metals and products. D. Does this proposal maximize ROI, sales potential or total profit? This proposal will maximize the sales potential in the future for increased volumes and other products that can be run on these machines. Through time and experience, this equipment may also be.

Article: Three Perceptions of Project Cost


Question 1: What is the major point of the article? Answer: There are three perceptions of cost to be understood by an effective project manager: First, a commitment to project funds in accordance with a time based budget. Second, the accounting department addresses expenses recognition related to a project or an organizational profit and loss statement. Third, the comptroller of finance department views project cost as a cash outflow (cash flow). Project Manager must also realize that the timing of cost identification can affect projects and corporate financial performance; they are improving cash flow, revenue and expense. And perceiving the different costs which they are reported. With this knowledge, the project manager can control more than the projects cost of sales.

Question 2: How does the accountant view project costs? Answer: The projects costs will be all project expenses, the accountant issues payment for expenses, which are recognized upon receipt of an invoice of purchasing activity. And when the project is completed, the account records revenues. Both expenses and revenues reported in the fiscal period to showing profits. To avoid serious problems in a long-term project in which expenses are accrued during each reporting period with no attendant revenue, the statements report revenue and expense based on a percentage of completion formulation. During each account period, take down an equitable percentage of the total project revenue, assigning an appropriate level of expense to calculate an acceptable period gross margin. At the end of each accounting year and at the end of project, adjustments are made to the recorded expenses to account the actual expenses, which is divided by the total estimated project budget expenses to calculate the percentage of total expense for the period. This becomes the completed percentage of project to determine the revenue.

Question 3: How does the controller view project costs? Answer: The controller usually is the comptroller of finance department, he or she is responsible for managing the organizations funds, and assuring the availability of the appropriate amount of cash for the projects payment, the comptroller really views project cost as a cash outflow. The comptroller knows a finite amount of cash will be required for the accounts payable at the end of a fixed period, the comptroller provides the funds, payments is made, and the actual cash outflow is recorded.

Question 4: How does the project manager view project costs? Answer: Project manager places the purchase order means a commitment, this commitment is made to the supplier, the project manager deal with commitments when he or she is planning and reporting project costs. Many accounting systems are not support project cost reporting needs, and do not identify commitments for providing a suitable information, so that the project manager cannot handle on

the budget status at the control process. In this situation, the project manager has the responsibility of maintaining personal records to track the projects commitments.

Questions 5: What other costs the project manager need to be cognizant of? What actions should the PM take concerning these other costs? Answer: The project manager plans and executes the project can increase companys profitability through improving effectiveness and efficiency on reducing expenses, cash outflow. To be a complete effective project manager that he or she must be full understanding in the cost accounting practices, cost of goods sold, wages expense, utilities expense, depreciation expense, insurance expense, interest expense, tax expense, and net profit (net income). The PM must take care of what a project manager can do to influence cost of goods sold (project cost), financial expense, and tax: 1) Cost of Goods Sold: A directed and controlled investment in the evaluation of best alternative design concepts can obtain significant saving of project cost. Take care excessive safety and uncertain factors can be controlled without affecting project performance. Considering the budget contains an adequate contingency for the schedule change, and economic inflation. 2) Financial Expense: Considering deferred factors to minimize risk of penalty for delayed schedule in the execution of all projects. To minimize the lost interest from a delay in receiving payment, invoice must be processed and send to the clients quickly. 3) Tax Expense: The project manager should consider taxes gained from a capital investment project in the project, which schedule the related tasks to meet the tax deadline.

Case Study: The Sharon Construction Corporation

Question 1: Analyze the five proposals and make recommendations based on expected costs? Answer About The management team was asked consider alter-natives for coping with the situation. At the end of the week five proposals were submitted. We discuss below. Expedite the pouring of seat gallery supports. This would cost $20,000 and cut the duration of the activity to six weeks. The cost is high and the performance is low. 1. The same as proposal I, but in addition, put a double shift on the filling of the field. A cost of $10,000 would result in a five-week time reduction. The cost is also high and the performance is low. 2. The roof is very important since it precedes several activities. The use of three shifts and some overtime could cut six weeks off the roofing at an additional cost of only $9000. The cost is also high and the performance is high. 3. Do nothing special until December 1. Then, if December is indeed cold, defer the pouring of the seat gallery supports until the cold wave breaks, schedule permitting, and heat whenever necessary. If a strike occurs, wait until it is over (no other choice) and then expedite all remaining activities. In that case, the duration of any activity could be cut but to no less than one third of its normal duration. The additional cost per activity for any week which is cut would be $3000. The cost is reasonable and the performance is high. 4. Do not take any special action; that is, hope and pray that no strike and no cold December occur (no cost) and this is bad idea. Analysis of Baseline & A5: Do nothing (Tcp = 48+x weeks)

Analysis of A1: Expedite pouring concrete for seat gallery supports ($20,000) (activity G from 12 to 6 weeks) (Tcp=42+x)

Analysis of A2: Expedite pouring concrete for seat gallery supports ($20,000) (G from 12 to 6 weeks) and filling of the field ($10,000) (C from 14 to 9 weeks) (Tcp = 42+x)

Analysis of A3: Expedite the roofing ($9,000) (activity K from 8 to 2 weeks) (Tcp = 48+x)

Analysis of A4 with 8w strike: Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Tcp = 52)

Analysis of A4 with 12w strike: Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring or heat when necessary; if a strike occurs, expedite all activities after resolution ($3,000 per week cut) (Tcp = 56)

Time analysis:

Project Duration Probability Strike Alternative Alternative Alternative Alternative Alternative Strike Duration 1 2 3 4 5 (x: weeks) 0.50 0 42 42 48 48 48 0.35 8 50 50 56 52 56 0.15 12 54 54 60 56 60 E(x) 4.60 46.60 46.60 52.60 50.60 52.60 SD(x) 4.78 4.78 4.78 4.78 2.91 4.78
Cost analysis:

Summary Mild December Probability Alternative Alternative Alternative Alternative Alternative Strike 1 2 3 4 5 0.50 $20,000 $30,000 $9,000 $0 $0 0.35 $21,000 $31,000 $73,000 $14,000 $64,000 0.15 $53,000 $63,000 $135,000 $76,000 $126,000 E(x) $25,300 $35,300 $50,300 $16,300 $41,300 SD(x) $11,645 $11,645 $45,927 $25,871 $45,927 Summary Cold December Probability Alternative Alternative Alternative Alternative Alternative Strike 1 2 3 4 5 0.50 $20,000 $30,000 $9,668 $668 $668 0.35 $21,000 $31,000 $73,000 $14,000 $64,000 0.15 $53,000 $63,000 $135,000 $76,000 $126,000 E(x) $25,300 $35,300 $50,634 $16,634 $41,634 SD(x) $11,645 $11,645 $45,627 $25,662 $45,627
Recommendation: 1. A4: Do nothing until December 1st. If the cold is indeed extreme, postpone concrete pouring; if a strike occurs, expedite all activities after resolution (lowest E(x)) 2. A1: Expedite seat gallery supports (second lowest E(x)) A1 is better than A2 and A3 if the probability/risk of a strike is considered. A4 provides the option of speeding up the remaining tasks in case of a strike and doing nothing otherwise. This option is powerful. A4 has a lower E(x), but a higher uncertainty SD(x) (broad range of losses from $0 to $76,000) than A1. The analysis of the risk profiles will help management to select the alternative which fits the corporations risk strategy.

If the corporation is adverse to risk, it could select A1 (losses are spread out from $20,000 to $53,000). A1 has a lower uncertainty (SD(x)) than A4.

The project duration could be a factor for the decision, if there are projects on hold due to lack of resources.

Question 2: What other basis might be used to make a decision beside expected costs? What then might the decision be? Answer: About the other basis might be used to make a decision besides expected costs. We also must consider the politic, organizational, human, and environment pollution problem, and they might the decision by the PM and general management.

Question 3: What other factors might enter into the decision such as behavioral, organizational and political? Answer: About the other factors might enter into the decision such as we also must consider the politic and human environment pollution problem, the staff and responsibility person is change etc.

Question 4: What decision would you make as the president? Answer: I would make decision to use the fourth proposals because IT does nothing-special time until December 1. Then, if December is indeed cold, defer the pouring of the seat gallery supports until the cold wave breaks, schedule permitting, and heat whenever necessary. If a strike occurs, wait until it is over (no other choice) and then expedite all remaining activities. In that case, the duration of any activity could be cut but to no less than one third of its normal duration. The additional cost per activity for any week, which is cut, would be $3000. The time can control and schedule and the cost is reasonable and the performance is high.