International Guidance and Controls

2 Pages Posted: 1 Jun 2017

See all articles by Phillip E. Pfeifer

Phillip E. Pfeifer

University of Virginia - Darden School of Business

Abstract

Thomas Stearns must decide whether to continue with planned software development and risk missing the completion deadline on a $20 million project or bite the bullet and make some costly hardware changes that will virtually eliminate the risk of missing the deadline. This introductory decision analysis case: (1) contains a compound (square-circle-square) decision, (2) encourages a discussion of the meaning of probability, and (3) requires the use of sensitivity analysis to handle the unspecified costs of missing the deadline.

Excerpt

UVA-QA-0350

INTERNATIONAL GUIDANCE AND CONTROLS

Time was running out on the $ 20 million CARV (confined aquatic recovery vehicle) project, and Project Manager Thomas Stearns was concerned about maintaining the project's schedule. With 10 months left, considerable portions of the software remained to be developed, and Stearns was by no means certain that all the necessary development work would be completed on time.

Software Development

Stearns had had his project team working full force in recent months on the software development for CARV's command and guidance system. His headcount (the number of full-time-equivalent workers assigned to the project) had been increased recently, so total development costs were running at $ 300,000 per month, which was 25% over the project's budget. Stearns believed that there was but an 80% chance that the necessary software would be completed in the remaining 10 months. Despite the risk of not maintaining the schedule, he could not increase the headcount on the project or increase the rate of software development in any way.

If the software were not completed on time, Stearns was fairly certain that one or two extra months of work would suffice to complete the project. Unfortunately, each month's delay in project completion meant a 2.5% ($ 500,000) reduction in the price of the contract. In addition to this precisely defined cost of not meeting the schedule, a hard‑to‑quantify, but no less significant cost of lost reputation was associated with not completing the project as scheduled.

. . .

Keywords: decision analysis, probability, project management, sensitivity analysis

Suggested Citation

Pfeifer, Phillip E., International Guidance and Controls. Darden Case No. UVA-QA-0350, Available at SSRN: https://ssrn.com/abstract=2975064

Phillip E. Pfeifer (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4803 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/Pfeifer.htm

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