Project Management: Crashing and Risk Management

Matrix Engineering Company specializes in construction, rehabilitation and dismantling of tanks, and other turnkey projects. Matrix Engineering Company prides itself on its ability to delivery good quality projects under budget and as scheduled. The company takes project planning very seriously and usually aims for up to 90% probability of completion and would manage the remaining risk with its expertise in operational excellence.

Emerald Refinery and Petrochemical Company, one of Matrix’s biggest clients, won a contract to export refined products overseas. For Emerald Refinery and Petrochemical Company to fulfil the terms in the export contract that starts in 12 months, the company needs to refurbish one of its old tanks. Emerald Refinery and Petrochemical Company has broken the project into three (3) different phases – Desludge, Dismantle, and Refurbish – and wants the entire project completed in ten (10) months, with a two (2) months period to respond to any uncertainty before the start of the contract.

In the last Emerald Refinery and Petrochemical Company’s management meeting, the management of the company agreed to skip the pre-qualification, tender, and bidding process and award this contract to Matrix Engineering because of Matrix’s excellent record of delivering on time. Emerald’s management agreed that the project should be awarded in phases, and the satisfactory completion of one phase leads to the award of contract of the next phase. The management of Emerald Refinery and Petrochemical Company has budgeted $250,000 for Phase I and has placed a deadline of a 100 days.

Three days ago, the Management of Emerald Refinery and Petrochemical Company informed the management of Matrix Engineering Company of their decision and invited them for a tour of the plant. Today, the managements of Matrix Engineering and Emerald Refinery are having a meeting after which the management of Matrix Engineering would tour the tank and ask questions. The management of Matrix Engineering has a week to plan and access the level of work to be done and then report back to the management of Emerald Refinery if they accept the terms. Although the management of Emerald had not specified any penalties for delay, the management of Matrix understand that their reputation and future business with Emerald is at stake if thing go awry; also, Matrix Engineering is facing serious competition in the construction industry and would not want a contract from one of its biggest clients to go to its competitor. The Head of Projects at Matrix Engineering were assigned the responsibility to access the situation and come up with a plan of activities, which is summarized in the tables below.