program. I was really Di negotiations. As Chief contract lemarked Gus Bell, vice president and general manager prepare your data and line up your team. I want to see you when you're ff Stokes was chief contract negotiator for Cory Electric, a $250-million a year electrical ufacturer serving virtually every major US industry. Cory Electric had a well established matrix withstood fifteen years of testing. Job casting standards were well established, but did include on the discretion of the functional manager Car y to 80 Jeff S ponents manufa virtuallye rrethat had withstood fi me "Tar" upon the Jeff met with Gus Bell to discuss the negotiation process. no weeks later le u selected an appropriate team? You had better make sure that you're covered on all sides" Quis Bell: "Have There will be four veloped the engine whour package, and four, plus myself, at the negotiating table; the programme manager, the chief engineer who gineering labour packages; the chief manufacturing engineer who developed the production and a pricing specialist who has been on the proposal since the kick-off meeting. We have a and should be able to handle any questions" strong team and sh Qus Bell: "Okay, I'll tak back with a guarant I'll take your word for it. I have my own checklist for contract negotiations. I want you to come aranteed fee of $1.6 million for our stockholders. Have you worked out the possible situations ed on the negotiated costs?" Jeff: Yes! Our mini vary depending on to our target cost and ir minimum position is $20 million plus an 8 percent profit. Of course, this profit percentage will ing on the negotiated cost. We can bid the programme at $ 15 million cost; that's $5 million below cost and still book a 1.5 million profit by overrunni profit by overrunning the cost-plus-fee contract. Here is a list of the sible cases. See Exhibit one below. Chibitl. Cost positions Negotiated Fee Negotiated Target Fee Overrun Fee Total Fee Total Package 5000.000 16000.000 17.000.000 TR000.000 10.000.000 20.000.000 21.000.000 2000.000 23.000.000 0 .00 14.00 12 SO 11.18 1000 8.95 8.00 1.600.000 1.600.000 1.000.000 1.600.000 1.600.000 1.600.000 1.600.000 1.600.000 1,600,000 1.600.000 500,000 400.000 300,000 200.000 100,000 6.36 5.65 500 2.100.000 2.000.000 1.900.000 1 ROD OOO 1.700.000 1,600,000 1,500,000 1.400.000 1.300.000 1.200.000 -- 100.000 - 200,000 -300,000 400.000 17,100,000 18.000.000 18,900,000 19.800.000 20.700.000 21.600.000 3.500.000 23.400.000 24.300.000 -5200.000 Assure total cost will be speur 7.61 21.000.000 22,000,000 2.000.000 M.000.000 7.27 Minimum position = $20.000.000 6.96 Minimum fee = 1.600.000 = 896 of minimum pos 6.67 Shangratis 096 PROGRAMME HANDBOOK: JANUARY 2020 INTAKE well as they MANCOSA: POSTGRADUATE DIPLO w vendors as sources wo new raw materia Gus Bell: "Has Jeff: "I've read over all terms and conditions, and so have all the project office personna functional managers. The only major item is that the customer wants us to qualify some few for raw material procurement. We have included in the package the cost of qualifying two Jeff: "Yes, ve something de take up to a suppliers" Gus Bell: "Where are the weak points in our proposal? I'm sure we have some ons. The impression ight be where we' ency. The customer contracts with him the employees who ects here at Cory. That learning curve h the customer at 35 Gus Bell: "p the person off contract necessary. Source: Joh Jeff: "Last month, the customer sent in a finding team to go over all of our labour justifications that I get from our people is that we're covered all the way round. The only major problem might be be performing on our learnine curve. We put into the proposal 45 percent learning curve efficiency has indicated that we should be up around 50 to 55 percent efficiency based on our previous contra Unfortunately, those contracts the customer referred to were four years old. Several of the am worked on those programs have left the company. Others are assigned to on-going projects her estimate that we could put together about 10 percent of people we used previously. That in percentage will be a big point for disagreements. We finished off the previous programs with the ne percent learning curve position. I don't see how they can expect us to be smarter, given these circun these circumstances." QUESTION "I'd like to man-hour in that or If so muc example e a fool proof audit trail Gus Bell: "If that's the only weakness then we're in good shape. It sounds like we have a fool pront That's good! What's your negotiation sequence going to be? negotiate the raw materials, Hopefully, we can do Jeff: "I'd like to negotiate the bottom line only, but that's a dream. We'll probably negotiate the raw ma the man-hours and the learning curve, the overhead rate, and finally the profit percentage. Hopefully w it in that order." QUESTIC For the project may be time is QUES Gus Bell: "Do you think that we'll be able to negotiate a cost above our minimum position?" Analy: negot Jeff: "Our proposal was $22.2 million. I don't foresee any problem that will prevent us from coming out ahead the minimum position. The 5 percent change in learning curve efficiency amounts to approximately $ 1 milline We should be well covered. "The first move will be up to them. I expect that they'll come in with an offer of $ 18 to $19 million. Using the binary chop procedure, that'll give us our guaranteed minimum position. SECT QUE With dura Gus Bell: "Do you know the guys who you'll be negotiating with?" Jeff: "Yes, I've dealt with them before. The last time, the negotiations took three days. I think we both got what we wanted. I expect this one to go just smoothly" QU Wit du Gus Bell: "Okay, Jeff. I'm convinced we're prepared for negotiations. Have a good trip" The negotiations began at 9:00 AM on Monday morning. The customer countered the original proposal of $22.2 million with an offer of $15 million. After six solid hours of arguments, Jeff and his team adjourned. Jeff immediately called Gus Bell at Cory Electric. Jeff: "Their counteroffer to our bid is absurd. They've asked us to make a counteroffer to their offer. We can't do that. The instant we give them a counter-offer, we are in fact giving credibility to their absurd bid. Now, they're claiming that, if we don't give them a counteroffer, then we're not bargaining in good faith. I think were in trouble" PROGRAMME HANDBOOK: JANUARY 2020 INTAKE in the next day or two, contract negotiations cake up to all ement of the proposal, task by task. Unless wo, contract negotiations will probably Bell: "Perhaps this is is is one program that should be negotiated at the top levels of management. Find potiating with reports to a vice president and general manager, as you do. It no us someone at your level. We'll negotiate this at my level, Gus Berton that you're negotiating with reports to be negotiated at act negotiations until the custo sion we'll mer im. the person that off contract ne necessary, Source: John Wil John Wiley & Sons Inc. management. Find out if ser, as you do. If not, break QUESTION 1 negotiate the bottom line only, but that the bottom line only, but that's a dream. We'll probably negotiate the raw materials, learning curve, the overhead rate, and finally the profit percentage. Hopefully, we can do yd like to negotia nan-hours and the lear (20) in that order." v luncertainty) was on man-hours, discuss an appropriate time estimating approach using an if so much variability (un example. QUESTION 2 he case study above, Create a PERT schedule du above, Create a PERT schedule with the key activities for the $20 million contract negotiation hould be between 6 to 10 activities identified from the case study. Additional relevant activities od Create an AON network diagram and find the critical path using slack once estimated activity (20) project. There should be may be included. Cre time is established. rious types of Gantt charts Gus bell and Jeff can use to schedule preparations for the above QUESTION 3 Analyse the various types negotiation. (20) SECTION B QUESTION 4 With the aid of an example, critically discuss how making cost and schedule trade-offs may accelerate project (40) (20) duration QUESTION 5 With the aid of an example, critically discuss how performing activities in parallel may accelerate project (20) duration PROGRAMME HANDBOOK: JANUARY 2020 INTAKE program. I was really Di negotiations. As Chief contract lemarked Gus Bell, vice president and general manager prepare your data and line up your team. I want to see you when you're ff Stokes was chief contract negotiator for Cory Electric, a $250-million a year electrical ufacturer serving virtually every major US industry. Cory Electric had a well established matrix withstood fifteen years of testing. Job casting standards were well established, but did include on the discretion of the functional manager Car y to 80 Jeff S ponents manufa virtuallye rrethat had withstood fi me "Tar" upon the Jeff met with Gus Bell to discuss the negotiation process. no weeks later le u selected an appropriate team? You had better make sure that you're covered on all sides" Quis Bell: "Have There will be four veloped the engine whour package, and four, plus myself, at the negotiating table; the programme manager, the chief engineer who gineering labour packages; the chief manufacturing engineer who developed the production and a pricing specialist who has been on the proposal since the kick-off meeting. We have a and should be able to handle any questions" strong team and sh Qus Bell: "Okay, I'll tak back with a guarant I'll take your word for it. I have my own checklist for contract negotiations. I want you to come aranteed fee of $1.6 million for our stockholders. Have you worked out the possible situations ed on the negotiated costs?" Jeff: Yes! Our mini vary depending on to our target cost and ir minimum position is $20 million plus an 8 percent profit. Of course, this profit percentage will ing on the negotiated cost. We can bid the programme at $ 15 million cost; that's $5 million below cost and still book a 1.5 million profit by overrunni profit by overrunning the cost-plus-fee contract. Here is a list of the sible cases. See Exhibit one below. Chibitl. Cost positions Negotiated Fee Negotiated Target Fee Overrun Fee Total Fee Total Package 5000.000 16000.000 17.000.000 TR000.000 10.000.000 20.000.000 21.000.000 2000.000 23.000.000 0 .00 14.00 12 SO 11.18 1000 8.95 8.00 1.600.000 1.600.000 1.000.000 1.600.000 1.600.000 1.600.000 1.600.000 1.600.000 1,600,000 1.600.000 500,000 400.000 300,000 200.000 100,000 6.36 5.65 500 2.100.000 2.000.000 1.900.000 1 ROD OOO 1.700.000 1,600,000 1,500,000 1.400.000 1.300.000 1.200.000 -- 100.000 - 200,000 -300,000 400.000 17,100,000 18.000.000 18,900,000 19.800.000 20.700.000 21.600.000 3.500.000 23.400.000 24.300.000 -5200.000 Assure total cost will be speur 7.61 21.000.000 22,000,000 2.000.000 M.000.000 7.27 Minimum position = $20.000.000 6.96 Minimum fee = 1.600.000 = 896 of minimum pos 6.67 Shangratis 096 PROGRAMME HANDBOOK: JANUARY 2020 INTAKE well as they MANCOSA: POSTGRADUATE DIPLO w vendors as sources wo new raw materia Gus Bell: "Has Jeff: "I've read over all terms and conditions, and so have all the project office personna functional managers. The only major item is that the customer wants us to qualify some few for raw material procurement. We have included in the package the cost of qualifying two Jeff: "Yes, ve something de take up to a suppliers" Gus Bell: "Where are the weak points in our proposal? I'm sure we have some ons. The impression ight be where we' ency. The customer contracts with him the employees who ects here at Cory. That learning curve h the customer at 35 Gus Bell: "p the person off contract necessary. Source: Joh Jeff: "Last month, the customer sent in a finding team to go over all of our labour justifications that I get from our people is that we're covered all the way round. The only major problem might be be performing on our learnine curve. We put into the proposal 45 percent learning curve efficiency has indicated that we should be up around 50 to 55 percent efficiency based on our previous contra Unfortunately, those contracts the customer referred to were four years old. Several of the am worked on those programs have left the company. Others are assigned to on-going projects her estimate that we could put together about 10 percent of people we used previously. That in percentage will be a big point for disagreements. We finished off the previous programs with the ne percent learning curve position. I don't see how they can expect us to be smarter, given these circun these circumstances." QUESTION "I'd like to man-hour in that or If so muc example e a fool proof audit trail Gus Bell: "If that's the only weakness then we're in good shape. It sounds like we have a fool pront That's good! What's your negotiation sequence going to be? negotiate the raw materials, Hopefully, we can do Jeff: "I'd like to negotiate the bottom line only, but that's a dream. We'll probably negotiate the raw ma the man-hours and the learning curve, the overhead rate, and finally the profit percentage. Hopefully w it in that order." QUESTIC For the project may be time is QUES Gus Bell: "Do you think that we'll be able to negotiate a cost above our minimum position?" Analy: negot Jeff: "Our proposal was $22.2 million. I don't foresee any problem that will prevent us from coming out ahead the minimum position. The 5 percent change in learning curve efficiency amounts to approximately $ 1 milline We should be well covered. "The first move will be up to them. I expect that they'll come in with an offer of $ 18 to $19 million. Using the binary chop procedure, that'll give us our guaranteed minimum position. SECT QUE With dura Gus Bell: "Do you know the guys who you'll be negotiating with?" Jeff: "Yes, I've dealt with them before. The last time, the negotiations took three days. I think we both got what we wanted. I expect this one to go just smoothly" QU Wit du Gus Bell: "Okay, Jeff. I'm convinced we're prepared for negotiations. Have a good trip" The negotiations began at 9:00 AM on Monday morning. The customer countered the original proposal of $22.2 million with an offer of $15 million. After six solid hours of arguments, Jeff and his team adjourned. Jeff immediately called Gus Bell at Cory Electric. Jeff: "Their counteroffer to our bid is absurd. They've asked us to make a counteroffer to their offer. We can't do that. The instant we give them a counter-offer, we are in fact giving credibility to their absurd bid. Now, they're claiming that, if we don't give them a counteroffer, then we're not bargaining in good faith. I think were in trouble" PROGRAMME HANDBOOK: JANUARY 2020 INTAKE in the next day or two, contract negotiations cake up to all ement of the proposal, task by task. Unless wo, contract negotiations will probably Bell: "Perhaps this is is is one program that should be negotiated at the top levels of management. Find potiating with reports to a vice president and general manager, as you do. It no us someone at your level. We'll negotiate this at my level, Gus Berton that you're negotiating with reports to be negotiated at act negotiations until the custo sion we'll mer im. the person that off contract ne necessary, Source: John Wil John Wiley & Sons Inc. management. Find out if ser, as you do. If not, break QUESTION 1 negotiate the bottom line only, but that the bottom line only, but that's a dream. We'll probably negotiate the raw materials, learning curve, the overhead rate, and finally the profit percentage. Hopefully, we can do yd like to negotia nan-hours and the lear (20) in that order." v luncertainty) was on man-hours, discuss an appropriate time estimating approach using an if so much variability (un example. QUESTION 2 he case study above, Create a PERT schedule du above, Create a PERT schedule with the key activities for the $20 million contract negotiation hould be between 6 to 10 activities identified from the case study. Additional relevant activities od Create an AON network diagram and find the critical path using slack once estimated activity (20) project. There should be may be included. Cre time is established. rious types of Gantt charts Gus bell and Jeff can use to schedule preparations for the above QUESTION 3 Analyse the various types negotiation. (20) SECTION B QUESTION 4 With the aid of an example, critically discuss how making cost and schedule trade-offs may accelerate project (40) (20) duration QUESTION 5 With the aid of an example, critically discuss how performing activities in parallel may accelerate project (20) duration PROGRAMME HANDBOOK: JANUARY 2020 INTAKE