case study

11.2.1 Problem Statement

A contractor working on an outdoor construction project in a coastal area

is reviewing progress on August l. If normal progress is maintained and no

time is last due to hurricanes, the job will be completed on August 31. However,

due to the poor weather conditions in the area after August 16, there will be

only a 40 percent chance of finishing on time. It is estaimated that there is a

50 percent chance of a minor hurricane, which will cause a delay of 5 days, and

a 10 percent chance of a major hurricane, which will cause a delay of 10 days.

It must be decided now whether to start a crash program on August 2 at an addi-

tional cost of $75 per day and finish the project on August 16. As an alternative,

the normal schedule can be maintained and progress reviewed on August 31.

At that time if a hurricane has occurred and the project is delayed, there will be

a choice of accepting the delay at a certain penalty cost or trying to crash the

program then. The penalty cost for delay of completion will be $400 per day

for the first 5 days and $600 per day for the second 5 days. The additional cost

of a crash program after the hurricane will be $200 per day. The total addi-

tional cost is computed as the sum of delay penalty cost and crash cost.

It is also estimated that the possible results (outcomes) of a crash program

after a minor hurricane causes a 5-day delay will be as follows:

Crash Program

Result

Save 1 day

Save 2 days

Save 3 days

Probability Total Additional Cost

0.5 $1600 + 800 = $2400

0.3 $1200 + 600 $1800

0.2 $800 + 400 $1200

The possible results of a crash program after a major hurricane causes a

10-day delay is estimated as follows :

Crash Program

Result

Save 2 days

Save 3 days

Save 4 days

Probability Total Additional Cost

0.7 $(2000 + 1800) + 1600 $5400

0.2 $(2000 + 1200) + 1400 $4600

0.1 $(2000 + 600) + 1200 = $3800