Planning
Moneysworth was keen to show his administrative
abilities. He decided not to involve the production people as they were always
too busy and, anyway, that would only delay progress. So, not one for wasting
time (on planning) Moneysworth immediately invited Expert Industrial Developers
(EID) to quote on the planned expansion. He reasoned that this contractor's prominence
on the industrial estate and their knowledge of industrial work would result
in a lower total project cost.
Meanwhile, Kim Cashman developed a monthly
cash flow chart as follows. First he set aside one million for contingencies.
Then he assumed that expenditure would be one million in each of the first and
last months, with an intervening ten months at $1.4 million. He carefully locked
the chart away in his drawer for future reference. All actual costs associated
with the project would be recorded as part of the company's normal book-keeping.
Upon Moneysworth's insistence, EID submitted
a fixed-price quotation. It amounted to $20 million and an eighteen month schedule.
After Moneysworth recovered from the shock, he persuaded Woody's management that
the price and schedule were excessive. (For their part, EID believed that Woody's
would need considerable help with their project planning and allowed for a number
of uncertainties). Further negotiations followed in which EID offered to undertake
the work based on a fully reimbursable contract.
Moneysworth started inquiries elsewhere but
EID countered with an offer to do their own work on cost plus but solicit fixed
price quotations for all sub-trade work. Under this arrangement EID would be
paid an hourly rate covering direct wages or salaries, payroll burden, head-office
overhead and profit. This rate would extend to all engineering, procurement,
construction and commissioning for which EID would employ Schemers and Plotters
(S&P) for the building and industrial design work. Moneysworth felt that
the proposed hourly rate was reasonable and that the hours could be monitored
effectively. He persuaded Woody's directors to proceed accordingly.
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Project
Concept 
