Challenges Strategies and Project Selections

1. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why? -The project that has a better cash flow standpoint using the payback period would be the Alpha project.

According to the Payback Period, the rate of return on an investment is greater with the Alpha project verses the Beta project. It would take approx 3. 75 yrs to “repay” the sum of the original investment for the Alpha project whereas for the Beta project, the rate of investment would take approx 4 years. The company would see their investment back much sooner if they went with the Alpha project. 2. (55 points – 5 points each) Read the “Denver International Airport” case in Project Management Case Studies (pages 539-582).

Please answer, in writing, the following questions: (1)Was the decision to build a new airport at Denver strategically a sound decision? -Denver International Airport was experiencing such a rapid growth that Denver’s Regional Council of Governments concluded that Stapleton would not be able to handle the necessary traffic expected by the end of the year 2000. Modernization of Stapleton could have extended the inevitable problem to 2005, but were the headaches with Stapleton better cured through modernization or by building a new airport?

There was no question that insufficient airport capacity would cause Denver to lose valuable business. Being 500 miles from other major cities placed enormous pressure upon the need for air travel in and out of Denver. (6)Why was the new baggage handling system so important to United? -Having a faulty baggage handling system was dampening United business. DIA receives 80 percent of flights from United, which can be a big loss of revenue for such a reckonable company. In addition, United did not want their customers to wait for their luggage since several of their gates were more than a mile from the main terminal.

The new system was designed was the luggage to go from the plane to the carousel within a 10 minute period. Purpose of this, is to have the luggage arrive before the passengers. (7)What appears to be the single greatest risk in the decision to build DIA? -There’s actually three main risks: cost, human resources and weather. -Cost – The grading of the terminal area was completed at about $5 million under budget and grading the first runway was completed at about $1. 8 million under budget. This analyst was lead to believe that the original construction cost was accurate.

-Human Resources – The economic recession was hit the hardest by Denver International Airport. At the time it had 500 estimated construction employees. In 1992, it was estimated that 6,000 construction workers would be needed. However, 3,000 were on file, but those employees were questionable if they were qualified of the position. -Bad Weather – During the Winter months, was the greatest risks for the schedule. Lucky winters of ’89-’90 and ’90 – ’91 were decent, which was work had been completed. However, the worse came in the summer of ’90 because of bad weather.

(19) What was the function of the project management team (PMT) and why were two companies involved -The PMT is responsible for schedule coordination, cost control, information management and administration of approximately 100 design contractors, 160 general contractors and more than 2000 sub-contractors. The function of having a PMT is one company called Greiner Engineering firm, its purpose is for engineering, architecture and airport planning. Second company called Morrison-Knudsen Engineering, which is a design-construct firm.

3. (25 points – 5 points each) Read the “MIS Project Management at First National Bank” case (pages 56-69 in Project Management Case Studies). Please answer, in writing, the following questions: (3)What is the major problem with the Corporate Database project? Why did it fail so spectacularly?

-Since the company did not have a Corporate Database, no one in the company knew what the total of banking services a corporate customer was using because the corporate services that were provided by many of the banking departments. It was also impossible to determine how profitable a corporate customer was to the bank. The reason why it failed was because the project manager Jim Gunn was not adequately staffed and the staff that he did have were not as skilled as he needed them to be. Many of the meetings that were setup were constantly being cancelled. In addition, his team did not want to corporate with him, he was left to manage this project alone most of the time.