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Read the incident for Discussion” Plymouth Zoo’s Re-engineering Project” on page 103. What information should he ask the consultants for before accepting their proposal? What project planning tools would you suggest Avery ask the consultants to use to outline the project more specifically and address his concerns?

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Project Planning CEGR 400: Project Management Dr. Gbekeloluwa B. Oguntimein LEARNING OBJECTIVES FOR MODULE # 4 Upon completion of this module the student will be able to: identify the elements of a project plan. analyze, evaluate, create and present Work Breakdown Structures (WBS). analyze, evaluate and create Linear responsibility charts (LRC). Learning Objectives (cont’d) assess potential project pitfalls and formulate solutions. develop and execute project planning activities appropriate for their project life cycle. identify the contents of a project proposal. PROJECT PLANNING Planning projects , anchors the process of project management around the project of life cycle. The main purpose of project planning is to guide project execution. To guide project execution , plans must be realistic and useful so a fair amount of time and effort must go into the project planning process. PROJECT PLANNING (Cont’d) PROJECT LIFE CYCLE: $ Concept Planning Execution CONCEPT - Preliminary Goals. PLANNING - Establishment Of Formal Plans. EXECUTION - Work & Resources Procured. TERMINATION - Final Activities & Transfer To Client. Terminate PROJECT PLANNING (Cont’d) From the concept phase through the termination phase, projects require specific actions from a variety of participants. A work Breakdown Structure (WBS) and Linear Responsibility Chart (LRC) are tools to identify and describe the responsibilities and deadlines for every person and group associated with a project . ELEMENTS OF A PROJECT PLAN: OVERVIEW OBJECTIVES GENERAL APPROACH CONTRACTUAL ASPECTS SCHEDULES RESOURCES PERSONNEL EVALUATION METHODS RISK MANAGEMENT (POTENTIAL PROBLEMS) Elements of Project plan (cont’d) When all stakeholders have signed off on the plan, it becomes an operational Project Charter NOTE: A PLAN ACTS AS A MAP PLANNING IS AN ITERATIVE PROCESS OF IMPROVEMENT INDIVIDUALS & GROUPS CONTRIBUTE Overview The overview contains a brief description of the project and its deliverables (scope), together with a list of the major milestones or significant events in the project schedule and any constraints on the project scope. The project scope management includes the processes required to ensure that the project includes all the work required, and only the work required, to complete the project successfully. Project scope There are two types of scope: Product scope which are the features and functions that characterize a product, service or result Project scope which is the work that needs to be accomplished to deliver a product, service, or result. The project scope makes it possible to deliver the product scope, but it is not the actual end product. Project scope (cont’d) Scope management plan is the document that describes how the project scope will be defined, developed, and verified and how the work breakdown structure will be created and defined. It provides guidance on how the project scope will be managed and controlled by the project management team. It starts with collecting requirements from the project charter and stakeholders Project Objectives Project objectives is a more detailed description of the project scope, its deliverables and outcomes. It is also the project mission statement. The mission statement communicates to the project team members and others what will be done to achieve the project’s overall objectives. General approach The technological and managerial approaches to work are described in this section. An identification of the project as “derivative,” “Platform,” or “breakthrough” might be included in this section as well as relationship to other organization’s projects. Contractual aspects This section contains a complete description of all agreements made with the client or any third party. This list include all reporting requirements, the technical specifications of all deliverables, agreements on delivery dates; incentives for performance, for exceeding contractual requirements, and penalties for noncompliance; specific procedures for making changes in the deliverables, project review dates and procedures; and similar agreements. Schedules Outline of all schedules and milestones are included in this section. Each task in the project is listed in the WBS. Listed with each task is the time required to perform it. The project schedule is constructed from these data and is included in this section. Resource requirements Estimates of project expenses, both capital and operating are included here. The cost associated with each task are shown, and overhead and fixed charges are listed. Appropriate account numbers to be charged are listed with the relevant cost items. This becomes the project budget. Personnel This section covers the details of the project work force. It notes any special skill requirements, necessary training and special legal arrangements such as security clearances or nondisclosure agreements. Combined with schedule , it notes the time-phasing of all personnel requirements Risk Management Planners should list major and minor disasters that may occur when the project is undertaken such as late subcontractor deliveries, bad weather, equipment failure, changes in project scope, complex coordination problems. Contingency plans to deal with such potential crises should be a standard part of project plan. A method for quantifying the potential seriousness of risks, failure Mode and Effects Analysis (FMEA). Is helpful Evaluation methods Description of all project evaluation procedures and quality standards are found in this section. Responsibility and control of all project activities. Procedures to ensure compliance with all corporate requirements for monitoring, collecting, and sorting data on project performance, together with description of the required project history. PLANNING PROCESS: PRELIMINARY COORDINATION - WHOSE INVOLVED & WHAT WILL BE ACCOMPLISHED? WORK PLANS - DETAILED DESCRIPTION OF THE TASKS. PREPARATION OF BUDGET & SCHEDULE DESCRIPTION OF PROJECT STATUS REPORTS, INC. TIMING, CONTENTS, & WHO RECEIVES REPORTS. CHANGE ORDERS - NEED TO BE APPROVED BY TOP MANAGEMENT & CLIENT. NOTE: PLANNING IS AN ITERATIVE PROCESS RESULTING IN THE PLAN BECOMING HARDENED. WORK BREAKDOWN STRUCTURE (WBS) The Work Breakdown Structure (WBS) is a hierarchical description of the work that must be done to complete the project as described in the project overview statement (POS). It is a deliverable-oriented grouping of the work involved in a project that defines the total scope of the project. It is a document that breaks all the work required for the project into discrete tasks, and groups those tasks into a logical hierarchy. It is the process of subdividing project deliverables and project work into smaller more manageable components. WBS (cont’d) The WBS is a foundation document in project management because it provides the basis for planning and managing project schedules, costs, resources, and changes It is the cornerstone of project scope. It takes information from the project scope statement and fully defines and organizes the scope. WBS (cont’d An activity is simply a chunk of work. Tasks are smaller chunk of work. Both terms have been used interchangeably A work package is a task at the lowest level of the WBS. WBS (cont’d) It also represent the level of work that the project manager monitors and controls. ACTIVITIES LISTED IN THE ORDER THEY OCCUR (2 - 20) BREAKDOWN INTO TASKS (2-20) Work Break Down Structure Hierarchical Visualization of WBS GOAL Activity Activity Task # 1 Activity Level # 0 Level # 1 Activity Activity Activity Task # 2 ……. Task # 3 Level # 2 Level # m Uses for the WBS The WBS has four uses: Thought process tool: WBS is a thought process. It is a design and planning tool. It helps the PM and the project team visualize exactly how the work of the project can be defined and managed effectively. Architectural design tool: The BS is a picture of the work of the project and how the items of work are related to none another. Planning tool: In the planning phase, the WBS gives the project team a detailed representation of the project as a collection of activities that must be completed in order for the project to be completed. Project status tool: The WBS is used as a structure for reporting project status. The project activities are consolidated from the bottom as lower-level activities are completed Generating the WBS There are two approaches that have been used in generating the WBS: Top-Down Approach: This begins at the goal level and successively partitions work down to lower levels of definition until the participants are satisfied that the work has been sufficiently defined. Variations of the top-down approach are The team approach: The entire team works on all parts of the WBS using the most knowledgeable team member to facilitate the further decomposition of that part of the WBS. Generating the WBS (cont’d) The Subteam approach. This is recommended when time is premium. The planning team is divided into subteams as there are activities at level 1. Then the following steps are followed The planning team agrees on the approach to building the first level of the WBS The planning team creates the level 1 activities A subjected matter experts leads in further decomposition of the WBS for his or her area of expertise The team suggests decomposition ideas the team for the expert until each activity within the level 1 activities meets the WBS completion criteria. Generating the WBS (cont’d) Bottom-Up Approach: This is more like a brain storming approach. The first steps are the same as those of the top-down-approach: The planning team is divided into as many groups as there are first-level activities. Each group then makes a list of the activities that must be completed in order to complete the first-level activity. A HIERARCHIAL SYSTEM: GOALS/OBJECTIVES REQUIRED ACTIVITIES TO MEET OBJECTIVES EACH ACTIVITY HAS AN OUTCOME SUBACTIVITIES HAVE OUTCOMES NOTE: THE WBS REFLECTS THE ACTION THAT WAS DEVELOPED. WBS ILLUSTRATES HOW EACH PIECE OF THE PROJECT CONTRIBUTES TO THE WHOLE. SHOWS RELATIONSHIPS BETWEEN WORK GROUPS. USES OF THE WBS: INPUTS TO : PLANNING SCHEDULING MEASURING PERFORMANCE ESTIMATING COST KEY POINTS OF THE WBS: THE WBS DESCRIPTION SHOULD INCLUDE AN ACTION VERB; EXAMPLES: ASSEMBLE ESTABLISH PREPARE UPDATE EACH TASK SHOULD HAVE AN OWNER (PERSONS NAME OR TITLE) WBS IS A TOOL , NOT AN END WBS HAS MULTIPLE USES WBS IS NOT A SCHEDULE WBS IS A GOOD TEAM BUILDING TOOL PROJECT PROPOSALS The project proposal includes the following: A detailed description of each work activity. The resources required to complete the activity. The schedule start and end date of each activity. The estimated cost and completion date of the project. PROJECT PROPOSALS: STRUCTURE ---------------------- BIDDING STRATEGY COVER LETTER EXECUTIVE SUMMARY TECHNICAL PROBLEM & HOW IT WILL BE APPROACHED (IN SUFFICIENT DETAIL) PROJECT PROPOSALS (cont): IMPLEMENTATION PLAN, TO INCLUDE: TIME REQUIRED COST MATERIALS MAJOR SUBDIVISION OF PROJECT PERT & GANTT CHARTS LOGISTICS & ADMINISTRATION PLAN, TO INCLUDE: SUPPLY OF FACILITIES & EQUIPMENT HOW ADMINISTERED & REPORTING DESCRIPTION OF THE TEAM, INC.. DISCIPLINES EXPERIENCE Budgeting and Cost Estimation CEGR 400: Project Management Dr. Gbekeloluwa B. Oguntimein LEARNING OBJECTIVES Upon completion of this module the student will be able: To categorize different type of project method Top down , bottom up, zero based , program planning budgeting method To evaluate budgets and cost estimates To produce a project budget using top down or bottom up method. LEARNING OBJECTIVES (Cont’d) To propose ways to improve estimates and respond to budget uncertainty. To identify errors in cost estimation. PROJECT COST MANANAGEMENT Project cost management includes the processes involved in estimating, budgeting and controlling costs so that the project can be completed within the approved budget. Along with the project schedule which will be discussed later , the project budget is one of the most important documents in the project. Cost estimates are developed for cost categories and WBS elements and then applied across the schedule to develop a funding curve and a cost baseline. BUDGETING & COST ESTIMATION IN ADDITION TO PLANNING THE TECHNICAL ASPECTS OF THE PROJECT PLANS , THE pm ALSO NEEDS TO SPEND TIME ON ESTABLISHING THE PROJECT BUDGET. BUDGET: PART OF THE PLAN FOR ALLOCATING ORGANIZATION RESOURCES TO THE PROJECT ACTIVITIES. IT TIES THE PROJECT TO THE ORGANIZATION’S AIM AND OBJECTIVES THROUGH ORGANIZATIONAL POLICY. . BUDGETING & COST ESTIMATION (CONT’D) A CONTROL DOCUMENT STANDARD OF COMPARISON. HENCE THE PROJECT BUDGET IS NOTHING MORE THAN THE PROJECT PLAN,BASED ON THE WBS, EXPRESSED IN MONETARY TERMSAND IT BECOMES PART OF THE PROJECT CHARTER. ONCE BUDGET IS DEVELOPED , IT ACTS AS A TOOL FOR UPPER MANAGEMENT TO MONITOR AND GUIDE THE PROJECT. BUDGETING & COST ESTIMATION (CONT’D) NOTE: BUDGETS ARE TIED TO ACHIEVEMENTS CAN REPRESENT COLLECTIVE EXPERIENCE OF THE COMPANY (RULES OF THUMB) SIMILAR PROJECTS MAY SERVE AS GUIDELINES BUDGETING IS SIMPLY THE PROCESS OF FORCASTING WHAT RESOURCESTHE PROJECT WILL REQUIRE, WHAT QUANTITIESOF EACH WILL BE NEEDED, WHEN THEY WILL BE NEEDED, AND HOW MUSCH THEY WILL COST. BUDGETING & COST ESTIMATION (CONT’D) PROJECT BUDGETS ARE MORE DIFFICULT THAN DEVELOPING REGULAR DEPARTMENTAL BUDGET WHICH USUALLY FOLOW THE FORMULAR “THE SAME AS LAST YEAR PLUS X PER CENT” ORGANIZATIONAL TRADITION IMPACTS PROJECT BUDGETING, PARTICULARLY IN DECISIONS ABOUT HOW OVERHEAD AND OTHER INDIRECT COSTS ARE CHARGED AGAINST THE PROJECT METHODS FOR GATHERING BUDGET DATA TOP - DOWN – BASED ON COLLECTIVE JUDGEMENT AND EXPERIENCE OF TOP & MIDDLE MANAGERS ON PAST PROJECTS ADVANTAGE: OVERALL BUDGET COSTS CAN BE ESTIMATEDQUITE ACCURATELY, THOUGH ELEMEMNTSMIGHT BE IN SUBSTANTIAL ERROR ERRORS IN FUNDING SMALL TASKS NEED NOT BE INDIVIDUALLY IDENTIFIED BECAUSE THE OVERALL BUDGET ALLOWS FOR EXCEPTIONS. SMALL BUT IMPORTANT TASKS DO NOT USUALLY CAUASE SERIOUS BUDGETARY PROBLEMS Bottom-Up budgeting IN BOTTOM – UP BUDGETING , THE WBS OR ACTION PLAN IDENTIFIESTHE LEMENTAL TASKS, WHOSE RESOURCE REQUIREMENTS ARE ESTIMATED IN DETAIL BY THOSE WHO DO THE WORK. THESE RESOURCES , SUCH AS LABOUR AND MATERIALS , ARE THEN CONVERTED TO COSTS AND COMBINED TO DETERMINE AN OVERALL DIRECT COST FOR THE PROJECT. THE ACCOUNTING DEPARTMENT OR FINANCE DEPARTMENT THEN ADDS , ACCORDING TO ORGANIZATIONAL POLICY THE INDIRECT COSTS, CONTINGENCY FUNDS AND PROFIT TO ARRIVE AT THE FINAL BUDGET. Bottom-Up Budgeting (cont’d) ADVANTAGE: SINCE THIS IS PARTICIPATIVE MANAGEMENT. IT TYPICALLI RESULT IN MORE ACCURATE ESTIMATESALTHOUGH THEY RUN THE RISK OF OVERLOOKING SOME SMALL BUT COSTLY TASKS. IT CAN LEAD TO BETTER MORALE , GREATER ACCEPTANCE OF THE RESULTING BUDGET, AND HEIGHTENED COMMITMENT BY PROJECT TEAM. IT CAN SERVE AS A GOOD MANAGERIAL TRAINING TECHNIQUE FOR ASPIRING PROJECT AND GENERAL MANAGERS. DISADVANTAGE – IT CAN ALSO IN OVERESTIMATED BUDGET AS A RESULT OF CONSERVATIVE ESTIMATED BY LOWERLEVEL WORKERS. Budgeting methods (cont’d) TOP - DOWN IS COMMON, BOTTOM - UP IS RARE BECAUSE UPPER LEVEL MANAGERS ARE OFTEN RELUCTANT TO LET WORKERS DEVELOP BUDGETS, FEARING NATURAL TENDENCY TO OVERSTATE COSTS, ANF FEARING COMPLAINTS IF THE BUDGET MUST LATER BE REDUCED TO MEET ORGANIZATIONAL RESOURCE LIMITATIONS. IDEALLY ORGANIZATION CAN EMPLOY BOTH FORMS OF DEVELOPING BUDGET. THE ONLY DISADVANTAGE OF THE USE OF BOTH METHODS IS THAT IT REQUIRES EXTRA TIME AND TROUBLE . Budgeting Methods (cont’d) Planning, Programming. Budgeting System (PPBS) PPBS developed when Robert McNamara was the secretary or Defense. It identifies, plans, and controls projects to maximize long-tem goals. It became obsolete because it was extremely difficult to measure cost and especially benefits. Budgeting methods (cont’d) Zero-base budgeting (ZBB) ZBB was introduced during the Carter administration It links funding with achievement It was introduced to cut wastes in government programs. It can help identify projects no longer of value but has not worked well, even in the government, because of the tremendous effort required to continually justify oneself. Stages of Budget development The PM should develop project budget in the following stages: Rough-order of Magnitude (ROM) estimate: an initial estimate of costs that’s ‘s based on a general sense of the type of work the project will likely entail. This estimate is also known as a ballpark estimate. Rough order of Magnitude (cont’d) Sometimes this estimate is more a statement of what someone is willing to spend rather than what the project will really cost. Typically , PMs don’t detail this estimate by lowest-level project activity because the estimate is prepared in a short amount of time, before the needed project activities have been completely identified. Stages of Budget development (cont’d) Detailed Budget (DB)estimate: An itemization of estimated costs for each project activity. PMs prepare this estimate by developing a detailed WBS and estimating the costs associated with the lowest level of activities. Completed, Approved project Budget(CB/AP) A detailed project budget that essential people approve and agree to support. Stages of Budget development (cont’d) The PM perform these budget development Project Phase Budget Method Concept?Conxceiv ROM e Define DB Start CB/AB Perform Revise AB Termination RevisedAB Bottom-Up and Top Down BUDGETING - AN ITERATIVE PROCESS THROUGH TIME MORE INFORMATION IS ADDED TO THE PROCESS NEGOTIATION EDUCATE SENIOR MANAGEMENT ON THE REALISTIC COSTS OF THE PROJECT - GET THEIR BUY - IN POSITIVE RELATIONSHIP BETWEEN PM & SENIOR MANAGEMENT - FAIR BUDGET COST ESTIMATING The process of developing an approximation of monetary resources needed to complete project activities is cost estimating. It is one of the most sensitive topics in project management. Customers and sponsors want to know how much it will cost early in the project so they can make good decisions. Estimating implies a prediction Cost Estimating (cont’d) A project budget is typically developed in stages, from an initial rough estimate to a detailed budget estimate through a completed, approved project budget. Budget take into account the following types of costs: Direct cost are expenditure for resources that are used solely to perform the project activities. Cost Estimating (cont’d) Direct cost include salaries paid to the people who work on the project; materials , supplies, and equipment bought for the project; travel to perform project work; and subcontracts for services performed for the project. Indirect costs: expenditures that are incurred to support project activities but that aren’t tracked individually. Cost Estimating (cont’d) Indirect costs fall into two subcategories: Overhead costs: expenditures for resources used to perform project activities but which are difficult to subdivide and allocate directly. Examples include employee benefits, office space rent, supplies, and the rental or purchase of furniture, fixtures, or equipment used to support work on the project. Cost Estimating (cont’d) General administrative costs: expenditure that keep the organization operational such as salaries of finance department and top management as well as fees for accounting and legal services. IMPROVING COST ESTIMATION DETAILED WORK DESCRIPTION INPUT FROM EXPERIENCED INDIVIDUALS INCLUDE RESOURCE NEEDS & AVAILABILITY BUREAU OF LABOR STATISTICS WAGE & PRICE INDICES CONTINGENCIES (PROJECTS NEED THESE) IMPROVING COST ESTIMATION (cont’d) NOTE: BUREAU OF LABOR STATISTICS WAGE & PRICE INDICES - GOOD REFERENCE TO COMMODITIES & WAGE RATES. PROJECTS NEED CONTINGENCIES UNDERBIDDING (A NO - NO) Methods Used in Improving Cost Estimates THE PMS HAVE A NUMBER OF WAYS TO IMPROVETHE PROCESS OF COST ESTIMATION. THESE RANGE FROM FORMALIZATION OF THE PROCESS, USING FORMS, PARAMETRIC SUCH AS THE THREE POINT ESTIMATES (PERT ESTIMATE), THE LEARNING CURVE (LEARNING RATES);TRACKING SIGNALS OPTIMISTIC + 4(MOST LIKELY) + PESSIMISTIC 6 Learning Curve I general research have shown that unit performance improves by a fixed percent each time the total production quantity doubles. More specifically each time the output doubles, the worker hours per unit decrease by a fixed percentage of their previous value. Learning Curve (cont’d) The percentage , called the learning rate is typically between 70 and 90 percent. The higher values are for more mechanical tasks, while the lower values are for more mental tasks such as solving problems. A common rate for manufacturing is 80%. EVALUATING COST ESTIMATES RANDOM ERRORS & SYSTEMATIC ERRORS: Random - overestimates and underestimates are equally likely to occur. Systematic - overestimates and underestimates are not equally likely to occur. There is some sort of bias. TO IDENTIFY ERRORS IN COST ESTIMATION: Calculate the mean absolute deviation (mad) and the tracking signal (ts). Mad is the average estimation error (a statistic). If the mad is a sizable fraction of the variable being estimated, the average error is large and the estimate is not very accurate. The tracking system (ts) measures the amount of bias. REFER TO PG. 130 FIG. 4-3. EXCEL SPREAD SHEET THE ACTUAL COST OF A VARIABLE IS SUBTRACTED FROM THE ESTIMATED COST DIVIDED BY THE ESTIMATED COST MINUS 1 GIVES THE PERCENTAGE RATIO OF FORECAST ERRORS (RFE)(COLUMN D). THE SUM IS SHOWN AT THE BOTTOM OF THE COLUMN. A POSITIVE VALUE INDICATES THAT THE ACTUALS ARE GREATER THAN THE ESTIMATES. THE FORECAST IS BIASED, LOW IF THE RATIO IS POSITIVE AND HIGH IF IT IS NEGATIVE. THE LARGER THE PERCENT ERROR , THE GREATER THE BIAS. THE ABSOLUTE VALUE OFCOLUMN D RFE IS SHOWN IN (COLUMN E). MEAN ABSOLUTE RATIO MAR (COLUMN F) IS THE RUNNING AVERAGE OF THE VALUES IN COLUMN E UP TO THAT PERIOD CALCULATED BY DIVIDING THE SUM OF THE ABSOLUTE VALUES FOR PERIODS (COLUMN E) BY THE NUMBER OF PERIODS (COLUMN A). THE TRACKING SIGNAL OF A VARIABLE FOR EACH PERIOD IS CALCULATED BY DIVIDING THE SUM OF RUNNING SUM OF THE VALUES IN COLUMN D BY THE MAR FOR THAT PERIOD. EXAMPLE: FOR PERIOD 2: RSFE = 100*[(240 – 242)/242 –1] = -0.8% (COLUMN D) ABSOLUTE VALUE = 0.8% (COLUMN E) MAR = (0.052 + 0.008)/2=0.060 / 2 = 0.030 (COLUMN F) TS = (0.O52+(-0.008))/0.030=0.044 /0.030 = 1.448 (COLUMN G). NOTE: TS IS SORT OF AN INDEX NUMBER. IF TS > 3 = TOO HIGH. IF THE SUM OF RSFE APPROACHES 0, ERRORS ARE RANDOM. IF NOT, THERE IS BIAS. Plymouth Zoo's Re-engineering Project The Chief Operating Officer of the Plymouth Zoo Avery Mitchell was put in charge after the CEO unexpect- edly died. Avery was named acting CEO and told by the zoo's Board of Directors that he would be considered for the position permanently if the next few months went smoothly. Avery was very nervous because he knew that the zoo was on the verge of financial troubles. He was not expecting to make the profits that had been pro- jected for the next few months. He knew that admissions were down as a result of recent unrest in the city and nationally. The deceased CEO had hired a consulting group to help identify cost savings for the zoo. The firm hired was unfamiliar to Avery, and there were rumors around the zoo that the lead consultant was a friend of the now deceased CEO. The consulting group had been interviewing staff at the zoo for the last two weeks in order to prepare a pro- posal for work re-design to cut costs. Avery met with the consultants, and they presented him with their pro- posal. The proposal outlined the cost of the consult- ants and the projected savings the zoo could expect after the consultants' work was finished. Avery was unclear about precisely how the savings were deter- mined and what would be the redesign project's specific deliverables. Questions: What should Avery Mitchell do next? What information should he ask the consultants for before accepting their proposal? What project planning tools would you suggest Avery ask the consultants to use to outline the project more specifically and address his concerns?
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What should Avery Mitchel do next? What information should he ask the consultants for
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