C AS E
Friendly Assisted Living Facility Case—7
It is now just 4 months until the Assisted Living Facility
program is scheduled to be completed. The team is excited
because they can watch the construction of the facility
and feel they are moving toward the end of this program.
Every week since construction began, the construction
project manager, Kyle Nanno, has been holding a meeting
of his project team. At the meetings he invites representatives of the construction company, the facilities manager
from Friendly Medical Center, the Director of Security,
and other key people as he deems necessary. The meetings
are scheduled every Friday at 1:00 pm and last not more
than 1 hour. No matter who is or is not there, Kyle starts
the meetings exactly at 1:00 pm. Kyle developed the following standing agenda:
Review schedule and budget as of today’s date
Review schedule and budget for next 2 weeks
Issues impacting schedule or budget
Next steps and action items to be completed
The construction project update presented at the
April 11, 20X1 meeting is shown on the next page.
After each meeting the construction project manager
emails the minutes of the meeting and the action item list
generated to each member of the Construction Project
team. He also sends the information to Fred Splient, the
president of Friendly Medical Center, as well as to each
member of the ALF Project Steering Team.
Following the update is the most recent copy of the
action items generated at the 4/11/X8 construction project meeting.
Upon reading the minutes and action items from the
week’s meeting, Fred got quite angry. Fred read the minutes every week and would immediately phone Kyle to ask
why certain decisions still had not been made. This week
he wanted to know why the location of the security panel
had not been picked out yet, and what the hair salon issue
was about. Kyle decided that these matters would be better
discussed face to face. He went to Fred’s office.
Kyle proceeded to explain to Fred that the Director of
Security, Frank Geagy, had not attended the construction
project update meeting in weeks. Kyle said that Frank
informed him that in light of the cost cutting going on in
the hospital, he is short staffed and cannot hire a new
security guard. Frank states that he personally has to cover
shifts during the time when the update meetings take
place. Kyle told Fred that he was not comfortable making
the security panel decision without the head of security’s
input, and that Frank has not returned his phone calls or
answered his emails. Fred Splient proceeded to tell Kyle in
a very loud and angry voice, “That guy is not short staffed
and is not busy covering anyone’s shift. Who does he think
he is?” Fred instructed Kyle to tell Frank to answer the
contractor’s questions immediately or the decisions would
be made for him.
Kyle said he would do so and then changed the subject.
He told Fred that they were still waiting for the city officials to approve the parking lot construction permit.
Friendly Medical Center’s legal officer estimated that it
would take 8–10 weeks to hear back on approval. Kyle
allocated that amount of time in the schedule.
Kyle received notice from Fred to proceed with the
parking lot construction on January 11, 20X8. On
February 9, he submitted the application for a permit, complete with appropriate plans and descriptions of the proposed lot, and allocated 10 weeks to wait for the county to
notify him. He expected approval on or before April 19
and scheduled construction to begin April 20. Privately, he
doubted he would hear from the county by his target date.
The lot would take 3 weeks to build, 2 weeks to install
the lighting and add landscaping, and 1 week to pave and
stripe. The plot had to be completed by the end of June so
that parking spaces would be available when Marketing
wanted to begin showing the facility to potential residents.
This was a tight schedule, but the marketing people
insisted that residents had to begin preparing for this kind
of move at least a month before they took residence.
Potential residents needed to see the facility, get familiar
with apartment layouts, and they needed a place to park.
Also, Marketing insisted on having some occupancy by
the opening date.
Kyle told Fred that Legal was calling the county weekly
to follow up. Fred wanted to know why the parking lot
construction was not outlined on the project plan for facility construction. Fred asked Kyle to add it to the Gantt
chart and to do a what‐if analysis on the assumption that
the county did not respond until May 1. Fred also wanted
to know the latest date that they could be notified and still
meet a June 15 deadline for completion of the lot.
As Kyle was leaving Fred’s office, Fred asked him about
the hair salon. Kyle explained that the COO and VP of
Marketing had come up with an idea to build and operate
a hair salon in the facility for the residents. They thought
this might be a great selling point that could generate revenue. They came to Kyle just 2 months ago and asked him
to include a hair salon on the first floor of the facility. Kyle
explained that he did not have enough information to be
able to determine the impact this would have on the construction schedule or the cost of this addition. Fred listened and then wondered if the members of his team had
done any analysis to determine if this was a good idea or
not. Fred told Kyle he would get back to him on that one.
He then made a phone call to the COO and VP of
Building ready for residents
Project Manager: K. Nanno.
First 45 units ready for residents 05/01/X8
Remaining 57 units (light &
heavy) ready to prepare for
Phase 4 ‐ Interiors
Phase 3 ‐ Enclosure
First 45 (light‐assisted) units
ready to prepare for occupancy
Phase 2 ‐ Structure
Phase 1 ‐ Foundation &
Construction & furnishings
Assisted Living Facility
Construction Project Update
as of 4/11/X8
QUES T IO NS
Friendly Assisted Living Facility Construction
coordination meeting 4/11/X8
ACTION ITEM LIST
Provide notice to proceed on
Provide PS. # for designer to
What are the security
requirements? There are fire
doors, and they do not have
locks. We have rough‐in for
card readers, but no electric
Lighting review—will exterior
lighting in addition to the
building mounted lights be
Location of security panel
Room number style and
Parking lot permit
Fire alarm connection to
Proposal to St.
Cost proposal to
St. Dismas 1/13/X7
Part of signage
for City to approve
Hair salon decision
Updated fire alarm drawings
1. What do you think the construction project manager
should have done when the Director of Security
stopped attending the project meetings?
2. Do you think it is an effective communications tool
to send the construction project meeting minutes to
the ALF steering team and the President? Support
3. How much time has to be made up for the original,
baseline schedule to be met?
4. Develop a plan and draw a Gantt chart for the
Parking Lot phase of the project as originally planned
by Kyle. Answer Fred’s questions.
5. What information does Fred need to make a decision
about building a hair salon?
CH AP T ER 7 / MON ITOR ING A ND C ONT ROL L ING T H E P R OJE CT
Palmstar Enterprises, Inc.
Palmstar Enterprises, a leading manufacturer of tablet
computers, is currently in the process of developing its
next generation device, the model 2000HD. A key feature
of the 2000HD is its high definition display. According to
the original project schedule, the 2000HD is to be released
1 month from now.
Because the amount of time required to convert the
existing software to capitalize on the high definition
display was significantly underestimated, the project has
fallen behind schedule. The project manager estimates
that without additional resources, the development project
will be 3 months late. He has also estimated that increasing
the project’s budget of $3 million by 30 percent would permit the project to be completed on schedule. The added
budget would be used primarily to staff the project with
additional software engineers.
If released on schedule, first quarter demand for the
2000HD is forecast to be 200,000 units at an initial price
of $450. Demand data for similar products suggest that
unit sales will increase 5 percent per quarter over the product’s 3‐year life. Despite pricing pressures in the market,
accounting data indicate that Palmstar is able to maintain
a 20 percent contribution margin to profit and overhead
through continuous process improvements and efficiencies accruing from producing in larger volumes.
1. What has a larger impact on Palmstar’s profits: delaying the 2000HD’s introduction by 3 months or
increasing the project’s budget by 30 percent?
2. Are there other factors you would consider in addition to profit?
Peak Lighting, Inc.
Peak Lighting, Inc. develops stages, lighting systems, and
special effects for the concert tours of major musical acts.
Recently, they were approached by Bullwhip, a popular
band, to develop the stage, lighting, and special effects for
its upcoming tour.
The project to develop the stage, lighting, and special
effects for a concert tour progresses through four major
phases. In the first phase, which lasts about a week, Peak
develops a sound track for the concert based on the song
list the band provides it for the tour. Using the sound
track, Peak employees develop a synchronized lighting and
special effects show on a computer that allows them to
view an animated stage with the lighting and special
effects as the sound track is being played.
In the second phase, the materials needed for the stage,
lighting, and special effects are ordered from outside suppliers. The lead time for receiving these materials is
4 weeks, and during this period the project team members
are assigned to other projects.
3. What should Palmstar do? Why?
4. How generalizable do you think the results of your
analysis in this particular case are to other situations?
Once all the materials arrive, the third phase involves
constructing the stage with the lighting and special effects.
Also, writing the computer code to control the lighting
and special effects is done in the third phase. This phase
takes 3 weeks.
In the final phase, which takes a week, the lighting and
special effects are tested and enhanced. The total cost of
the Bullwhip project is estimated to be $600,000 of which
$400,000 is for the stage, lighting equipment, and special
effects, and $200,000 is for labor costs.
Eric Page was recently hired as Peak’s VP of Operations.
All the project managers that oversee the stage and lighting projects report to Eric. Prior to joining Peak Lighting,
Eric served as a project manager for a leading management
consulting firm for 10 years. Based on his extensive project
management experience, one of the first things Eric did in
his new role as VP was implement a formal project reporting
system that would help him monitor the progress of the
projects under way.
The Bullwhip project had been underway for 5 weeks,
and all the materials had arrived. The project team was now
B IB LIOG RA PHY
ready to start the third phase of the project and construct
the stage with the designed lighting and special effects.
In reviewing the most recent progress report for the
Bullwhip project and based on his project management
experience, Eric became gravely concerned. According to
the report, the project had an earned value of $120,000
based on the project manager Jimmy Rush’s estimate that
20 percent of the project had been completed. In further
studying the report, Eric observed that the planned value
and actual costs incurred were both $440,000.
Based on his concern, Eric decided to walk down the
hall to Jimmy’s cubicle and discuss his concerns related to
the progress on the project.
I just reviewed the progress report for the Bullwhip project,
and I am very concerned that the project is falling way
behind schedule. Based on my review, it appears there are
very significant cost and schedule variances. As you know,
we have a hard deadline for completing the project as the
Bullwhip needs everything fully operational 2 weeks prior
to the start of their tour so they can rehearse with it.
To be perfectly honest, I don’t know much about schedule
and cost variances but I do have a great deal of experience
managing these projects. Again, I don’t know how you calculated the variances you mentioned, but in my view we
are exactly where we should be.
To this Eric replied:
I don’t see how you can possibly think the project is on
track when it has an earned value of only $120,000 and
the planned value by this point in the project is $440,000?
And I am equally disturbed you don’t understand basic
project management concepts such as earned value.
Later that day, Jimmy shared his frustration about his
new boss with one of the project team members.
“Eric really chewed me out today. He questioned my
ability to manage a project. I wonder if he even understands the nature of these projects. Does he even get
it that two thirds of the project costs are for materials
and that these costs are incurred in the early part of
1. Calculate the schedule variance and cost variance for
the Bullwhip project.
2. Does Jimmy’s point about the material costs have
merit? If so, does this have any implications for the
way the earned valued is calculated at Peak?
3. Who is right about the status of the project?
Eric or Jimmy?
4. What advice, if any, would you offer Eric related to
his new role of VP of Operations?
Ackoff, R. L. “Beyond Problem Solving.” Decision
Sciences, April 1974.
Adams, J. R., and L. L. Adams. “The Virtual Project:
Managing Tomorrow’s Team Today.” PM Network, January
1997. (An excellent brief discussion that covers the nature
of virtual projects and some of the communication methods allowing their proliferation.)
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Network, December 1996.
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PM Network, February 1999.
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1996. (This is one of five excellent, instructional articles
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Quality Improvement and Management Project at
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(This article discusses the development of a tool for finding and assessing the “best” managerial tools for project
CH AP T ER 7 / MON ITOR ING A ND C ONT ROL L ING T H E P R OJE CT
Ingram, T. “Client/Server, Imaging and Earned Value: A
Success Story.” PM Network, December 1995.
Meredith, J. R., and S. M. Shafer. Operations and Supply
Chain Management for MBAs, 6th ed. New York: John
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PA: Project Management Institute, 2013.
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a Major Automotive Seating Supplier.” Project Management
Journal, September 1991.
Thamhain, H. J. “Best Practices for Controlling
Technology‐Based Projects.” Project Management Journal,
December 1996. (A fine analytical study of finding and
assessing the “best practices” for controlling high‐
technology projects. It not only finds the “best” control
practices, but also generates a “benchmark” to which any
firm can compare its practices.)
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Practices.” PM Network, February 1997.
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Evaluating and Closing the Project
We now come to the exciting final stage in any project—witnessing the result of all our
project efforts! This usually consists of two sets of activities: evaluating the result of our
efforts and then closing down the project. As we will see, there are many ways to do both,
some relatively formal, some quick and dirty, and some rather casual. We discuss evaluation first, in the generic sense, and then discuss a very specific and often formal type of
evaluation known as the “project audit.” We contrast the project audit with the more
commonly recognized “financial audit.” We then describe the audit process, the audit
report, and give some advice for conduction such an audit.
Following this, we discuss various ways of closing out the project, including the possibility of early closure which can occur for a variety of reasons such as a reduced market
need for the output or a low expected return on the investment. Four major types of
closure are “by extinction,” where the project was either successfully completed or failed
(or expected to be a failure); “by addition,” where the project output is added to the
organization in whole, as with a new plant; “by integration,” where the project output
is distributed throughout the organization, as with a software upgrade. However, there
are some interesting vari ...
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