case study

XYZ Electronics In October 2016 XYZ Electronics won an 18-month labor intensive product development contract awarded by Hamilton Industries. The award was a cost reimbursable contract with a cost target of $2.70 million and a fixed fee of 6.75 percent of the target. The contract was XYZ's rst attempt at using formal project management, including a newly developed project management methodology. XYZ had won severai previous contracts from Hamilton Industries, but they were all fixed-price contracts with no requirement to use formal project management with earned value reporting. The terms and conditions of this contract included the following key points: 0 Project Management (formalized) was to be u5ed. o Earned value cost schedule reporting was a requirement. 0 The first earned value report was due at the end of the second month's effort and monthly thereafter. 0 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 XYZ 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 Hamilton RFP and would manage the contract after contract award, the entire cost accounting department, and the two line managers. The cost accounting group was not happy about having to learn earned value management techniques, but they reluctantly agreed to bid on the Hamilton RFP. 0n previous projects with Hamilton Industries, monthly interchange meetings were held. On this contract, it seemed that Hamilton industries believed that fewer interchange meetings would be necessary because the information necessary could just as easily be obtained through the earned value status reports. Hamilton appeared to have tremendous faith in the ability ofthe earned value measurement system to provide meaningful information. in the past, Hamilton had never mentioned that it was considering the possible implementation of an earned value measurement system as a requirement on all future contracts. XYZ Electronics won the contract by being the lowest bidder. During the planning phase, a work breakdown structure (W35) was developed containing 45 work packages of which only four work packages would be occurring during the rst four months of the project. XYZ Electronics designed a very simple status report for the project. The table below contains the nancial data provided to Hamilton Industries at the end of the third month. Work Totals at End of Month 2 [5) Totals at End of Month 3 (S) Packaes \"Ia-\"nu\" ___ ___mm _m-_ PV:Pianned Value EV: Earned Value AC: Actual Cost