Telestar International (Chapter 7 – Page 312)
1. Who do you believe is at fault in this situation?
I believe that the Project Manager is at fault in this situation. The structures manager strongly advised the project manager not to stop the activities in this department before testing the plant’s high-pressure pneumatic and electrical systems. The structures manager warned the project manager and even mentioned that the test was scheduled for the next month. I think it would have been more important to consider this risk and prevent this from happening, alone from a safety perspective. The project manager also mentioned that his boss expects him to finish this project without a cost overrun. However, maybe it would have been of importance to run this particular issue by his boss in order to either increase the budget or adjust the scope in order to successfully and safely finish the project.
2. Should the structures manager have been dedicated enough to continue to work on his own? Why or Why not?
This was running through my head for a little while after I read the text. It’s difficult to say. However, the structures manager did try to convince the project manager that it was a big risk to take and the project manager went ahead and took the risk. Even though the structures manager knew that this could potentially happen, the project manager did not listen to his advice. If he would have continued to work on his own, he would have disobeyed, he could have prevented the plant from exploding, however, he is kind of bound and can’t do much more than informing the project manager. He could have possibly tried to inform upper management of what is going on, but then again, it should be a conflict that is resolved between him and the PM. Also, I think that the PM should have tried to plan for conflicts better, since schedule constraints are some of the most common ones. I understand that the firm had a fixed-price and there is not much buffer when it comes to the financial side.
3. Can a functional manager, who considers his organization as strictly support, still be dedicated to total project success?
I think they could still be dedicated to project success because even though they only consider their organization as strictly support, they will be somewhat affected by the project success. Functional managers know that they must support the organization’s goals, therefore it is imperative for them to always have the best interest for a project in mind.
The Bathtub Period (Chapter 15 – Page 708-709)
1. Should Jerry go to the General Manager? Why or Why not?
I think Jerry should have informed the General Manager. Frank served as the intermediary between Jerry and and the General Manager, however, it doesn’t seem that both sides agree, therefore I believe that Frank did not do his job correctly. In addition to this, the management reserve should not be used in order to cover up bad estimations or budget overruns. It should be used to add valuable additional features to the product or for additional hours necessary.
2. Should the key people be supported on overhead?
Overhead costs are usually costs of resources that are essential for an organization to maintain its existence. Examples would include: payment of rent for office space, electricity costs, some office personal wages/factory personnel. Since these key people are essential to the project success, I would support them on overhead.
3. If this were a cost-plus program, would you consider approaching the customer with your problem in hopes of relief?
Cost-plus price contracts or reimbursable contracts are essentially all the same because they all pay the seller for the seller’s actual costs plus a fee, which represents the seller’s profit. There are a variety of cost reimbursable contracts, such as the Cost-Plus-Percentage-Fee (CPF), the Cost-Plus-Fixed Fee (CPFF) and the Cost-Plus-Incentive-Fee (CPIF). In this contract, the seller is paid for the seller’s actual costs plus a fee, which represents the seller’s profit. Due to this, the contractor’s motives can be misaligned with the buyers. It is typically used when there is a scope of services, but it is not well defined or when there are too many uncertainties for the seller to use a fixed price contract.
I probably would try to approach the customer with my problems in hopes of relief. Also, it would only be fair to the customer to be informed, since it’s not a fixed-price contract and additional work would require additional fees to be paid.

4. If you were the customer of this cost-plus program, what would your response be for additional funds for the bathtub period, assuming cost overrun?
Since this is not a fixed-price contract, it’s quite common that cost overruns occur due to the scope of services not being well defined. I would consider my options and try to make a decision considering the most effective and efficient way to complete the project. If additional funds and cost overruns are inevitable, I would try to determine if it would be worth it to crash the project and reduce costs in another way. It even depends on the kind of cost-plus contract. A CPF contract for example would actually give the seller an incentive to overspend because the higher the cost the higher the profit. So I would be more than glad to be involved considering the circumstances.
5. Would your previous answer chang if the program had the money available as a result of an underrun?
As I mentioned in my previous answer, since the scope is not as well defined in a cost-plus contract, I would consider all of the circumstances given and make my decision based on the current facts. Therefore, if the funds are needed, and the money is available, the decision to actually invest additional funds would probably be easier, however, even then I would try to determine what costs are truly necessary and what costs could be avoided. And again, in a cost-plus contract there is not as much of an incentive for the seller to not overspend. Therefore, I would probably set some incentives in order to encourage the seller.
6. How do you prevent this situation from recurring on all yearly follow-on contracts?
Pitfalls like these can impede the pricing function. This was somewhat of a buy-in decision, which is often based on the assumption that there will be bail-out changes or follow-on contracts later. Changes can be made to prevent these estimating pitfalls, therefore I would very carefully determine the key people and funds needed in order to complete the project successfully and prevent a similar situation from happening. It’s very important to keep proper documentation in order to learn from the previously earned experience.