An investment firm in Chicago that specializes in buying and retrofitting historical buildings goes through a cost/benefit analysis including NPV analysis. Once their project is selected, a well-liked project manager is selected, who then selects the project team from a pool of available employees. Once the team is selected the project objectives, goals, budget and timeline are developed. At this point, the stakeholders are approached with the final plan and expectations. It is customary to use contractors for much of the work in retrofit and renovation projects. The longer a project runs, the longer it takes for investors to recoup their initial investments and certainly longer to make any gains on their investments. An upcoming project is about to be launched for the building and included in the project proposal is a list of smaller projects related to the building. The first step is to decide which projects to undertake. The Group has a few decisions to make regarding the nature of the renovation and retrofitting. They can use standard supplies and materials that work well but do not offer any real benefit to carbon footprint reduction or energy efficiency. Alternatively, they could go all out and use materials and supplies that have energy efficiency and carbon footprint reduction capabilities and certification. Further, each project has some element of risk where project could fail, be delivered late, or run into cost overruns.

Table 1 below lists seven potential projects. The table shows the NPV, energy efficiency measured by cost savings, and a risk amount that may be lost considering the possibility of project failure or from a delayed completion time. The firm has a total amount of $15m available for the entire building renovation. The firm wonders, which projects should be undertaken? One of the benefits of performing previous projects is that the company can learn from its mistakes.

Project Description	Project	Cash Required	NPV	Reduced Cost of Energy	Risk
A/C and Heat Controls	1	$2,500	$8,000	$9,000	$(1,200)
Power Generation	2	$3,000	$7,500	$7,000	$(1,300)
Chiller Plant	3	$3,500	$10,000	$8,000	$(3,000)
Lighting	4	$4,500	$12,000	$5,800	$(5,000)
Plumbing	5	$5,000	$16,000	$6,000	$(4,000)
Windows	6	$6,000	$19,500	$5,500	$(18,000)
Roof	7	$7,000	$22,000	$4,000	$(15,000)

A previous retrofit project is listed in Table 2 below. It shows the activities for the project, along with its predecessor activities, and activity times. As mentioned previously, every investor wants the investment firm to reduce the project start to completion time; an effective project manager knows the tricks of the trade to reduce project length.

Activity Description	Activity	Time Estimates (Weeks)			Immediate Predecessors
		Optimistic	Most Likely	Pessimistic
Requirements	A	2	3	4
Market Assessment	B	4	7	10	A
Design	C	5	6	9	A
Development	D	6	7	16	C
Testing	E	7	9	10	D
Revising	F	4	5	6	B E
Documentation	G	3	6	10	D
Quality Assurance	H	2	4	7	C E
Pricing	I	2	2	2	B
Installation	J	3	4	14	F G H I
Project Handoff	K	2	3	4	J

Table 3 below lists data that the Project Manager could use when making project decisions related to shortening the project.

Activity Designation	Crash Time (Weeks)	Normal Cost ($)	Crash Cost ($)
A	3	10,000	10,000
B	6	20,000	25,000
C	5	15,000	30,000
D	6	45,000	65,000
E	8	10,000	20,000
F	4	15,000	18,000
G	4	20,000	30,000
H	3	10,000	15,000
I	2	5,000	5,000
J	5	40,000	50,000
K	2	15,000	25,000

A project manager from this previous project looked over the tables of data and exclaimed, If I had known, I wouldnt have agreed that we could finish the project in the 38 weeks that our investors demanded, but at least I know now how to select the correct activities when shortening a project.

Questions

1. Which projects should the firm undertake in Table 1? Please explain why you chose the particular project(s).

2. Prior to beginning the project in Table 2, which activity or activities should have caused the previous Project manager the most concern for meeting the scheduled completion date? Please explain your answer.

3. Crash the project by three weeks.

a. What is the duration of the project prior to crashing?

b. Which activities did you crash and why?

c. What is the additional cost to crash the project by three weeks?