BUS48004 Project Management - Assignment 3 Due: Sunday Oct 29th6PM Goal: To gain experience using the earned value management system. Refer to lectures 14&15 for this assignment. In October 2013 Franklin Electronics won an 18-month labor-intensive product development contract awarded by Spokane Industries. The award was a contract with a target cost of $2.66 million. Franklin Electronics will be reimbursed for the actual cost, plus a fixed fee of 6.75 percent of the target cost. Previously, Franklin had won several previous contracts from Spokane Industries, but they were all fixed-price contracts. This contract would be Franklin's first attempt at using a newly developed project management methodology. The terms and conditions of this contract included the following key points: -Earned value cost schedule reporting was a requirement. -The first earned value report was due at the end of the second month, and monthly thereafter. -There would be two technical interchange meetings, one at the end of the sixth month and another at the end of the twelfth month. Earned value reporting was new to Franklin Electronics. In order to respond to the original request for proposal (RFP), a consultant was hired to conduct a four-hour seminar on earned value management. In attendance were the project manager who was assigned to the Spokane RFP and would manage the contract after contract award, the entire cost accounting department, and two line managers. The cost accounting group was not happy about having to learn earned value management techniques, but they reluctantly agreed in order to bid on the Spokane RFP. On previous projects with Spokane Industries, monthly interchange meetings were held. On this contract, it seemed that Spokane Industries believed that fewer interchange meeting would be necessary because the information necessary could just as easily be obtained through the earned value status reports. Spokane appeared to have tremendous faith in the ability of the earned value measurement system to provide meaningful information. Franklin Electronics won the contract by being the lowest bidder. During the planning phase, a work breakdown structure was developed containing 45 work packages; of which only 4 work packages would be occurring during the first four months of the project. Franklin designed a very simple status report for the project. The table below contains the financial data provided to Spokane at the end of the third month. All values are in thousands of dollars. A week after sending this status report to Spokane, Franklin's project manager was asked to attend an emergency meeting requested by Spokane's vice president for engineering, who was functioning as the project sponsor. The vice president was threatening to cancel the project because of poor performance. At the meeting, the vice president commented, "Over the past month, the cost variance overrun has increased by 78 percent from $14,000 to $25,000, and the schedule variance slippage has increased by 45 percent from $31,000 to $45,000. At these rates, we are easily looking at a 500 percent cost overrun and a schedule slippage of at least one year. We cannot afford to let this project continue at this lackluster performance rate. If we cannot develop a plan to control time and cost any better than we have in the past three months, then I will just cancel the contract now, and we will find another contractor who can perform." QUESTIONS 1) Are the vice president's comments about cost and schedule variances correct? 2) What additional information (CPI, SPI, trends, EAC, ETC, VAC, TCPI) should have been included in the status report? 3) Does Franklin Electronics understand earned value measurement? If not, then what went wrong? 4) Was it a good idea for Spokane Industries to set the first meeting at six months? 5) What should the PM from Franklin say to defend the project's performance