W4_Muslem_Three-Point (PERT) Cost Estimation for Utilizing Extranet Service

By -
Problem Statement:
Extranet is an important element in OPWP procurement for the purpose of sharing tender documents and information with suppliers. Currently, OPWP does not utilize extranet, but relies on contracted advisors to provide this service. In some cases, advisors charge high cost for it. This report will provide a cost estimate for OPWP if it decided to procure this service separately.

Feasible Tendering Options:
      There are three tendering options; single tender, limited tenders and open tenders [1]. The cost for the last two options will be estimated under this report for the reasons explained in the next section.

Outcomes of each option:
      My previous blog has assessed the three options, and the following are found [2];
·         Single tender mode cannot be adopted due to OPWP's procurement obligations.
·         Limited tenders’ mode could lead to less competitive bids due to reduced competition, but shorter lead time.
·         Open tenders’ mode could be time and effort consuming due to uncertainty in number of tenders submitted. However, it could lead to more competitive prices.

Selection of Criterion;
      OPWP has to adhere to its obligation for economic purchase. Therefore, it is essential to choose the option that would lead to obtain low priced tenders.

Analysis and Cost estimates of Options:
For the procurement of the service at hand, it is assumed that most tenderers would be known locally. This is because that the tender advertisement will be placed locally. Therefore, very minor difference in procurement cost using both options is expected.
The extranet cost can be divided into two sub-costs; portal development cost and hosting cost. As per our IT Department, the cost for hosting 5GB of data is approximately 1,000 per year.  Our largest project has required 2.6 GB storage for data. The maximum number of large scale projects procured in one year in PD Department is 6 projects. Therefore, 15GB is required, meaning the annual cost of hosting is approximately OMR 3,000.
The following table shows cost of the basic portal development by a number of supplier.

Suppliers
Cost (OMR)
Supplier A
4,000
Supplier B
1,925
Supplier C
5,000
Supplier D
2,175
Supplier E
3,000
Supplier F
2,400
Average
3,080


Three-point (PERT) estimation is most common estimation technique [3]. The PERT estimate formula is Ce = (Co+4Cm+Cp)/6, where;
Most likely Cost (Cm): Average cost of OMR 3,080 is considered in this case for Cm.
Pessimistic Cost (Cp): The worst case is OMR 5,000.
Optimistic Cost (Co): The best case is OMR 1,925.
 Therefore, the expected portal development cost is approximately OMR 3,200 for both options.

Selection of Preferred Option:
Although both options are rated equally under this assessment in term of service cost, open tendering option is preferred in the analysis conducted on the previous blog. Therefore, open tendering mode is the best overall.

Recommendations and Performance Monitoring:
The following table shows cost estimates for the procurement of extranet service in OMR. It is recommended to consider 10% contingency above estimated cost for budget planning.
Items
Estimated Cost (OMR)
Portal Development
3,200
Annual Hosting Cost
3,000
Contingency (10%)
620
Total
6,820*





*OMR 3,000 to be paid on an annual basis.
The annual hosting cost can be adjusted depending on the required size as per undergoing projects in each year.

References:
[1] Central Vigilance Commission (ND), Tendering stage, PDF. Retrieved from; http://cvc.nic.in/3%20Tender%20Stage.pdf [19 November 2017].
[2] Muslem. A (2017). Assessing Tendering Options for Extranet Service Using Decision Matrix Analysis. Retrieved from; http://pmpopwp.blogspot.com/2017/12/w31muslemtendering-options-for-extranet.html [05 December 2017].
 [3] PM Study Circle (ND), 4 Tools to Estimate Costs in the Project Management. Retrieved from; https://pmstudycircle.com/2012/06/4-tools-to-estimate-costs-in-the-project-management/ [20 November 2017].

Comments

  1. Dr. PDGDecember 6, 2017 at 6:08 AM

    Great case study but how or why did you arbitrarily decide to allow a 10% contingency? What p level does a 10% contingency does that provide for you?

    Also your average (P50) was 3,080 how was it you calculated 3,200?

    I am going to REJECT this posting and ask you to do it over again but this time show us what P level your MANAGEMENT as adopted as a STANDARD and then redo your calculations using PERT and the Z tables as you were taught in class. What you have done here appears to be exactly what you should NOT be doing.....

    BR,
    Dr. PDG, Jakarta
    Dr. PDG, Jakarta

    ReplyDelete

Post a Comment

Popular posts from this blog

W1_Thuraiya_Leadership Styles analysis Using Tuckman model

By -
Image
1-       Problem Recognition:          OPWP PMP team are currently at the stage of distance learning in the PMP course. The     team consist of 13 members and has started course from 29 th Oct and we’re aiming to be certified no later than 25 th Mar . During the current stage, every individual must submit a weekly blog related to a real work issue faced in the organization to determine the causes and the solutions. In  first blog Dr. Paul has requested  to measure the team development and behavior using   Tuckman’s Model. To insure the success of every project the  members must  understand the goals and the roles of each one to collaborate to achieve their goals. Further the team leader must understand his team behavior to know the most optimum leadership style must be adopted while managing the project.  2-      Identify the Feasible Alternative Tuckman m...
Read more
By -
Image
W1__Hamda__Tuckman Analysis Assignment__ 1-        Problem Definition After completion the first stage in PMP course which was conducted in Muscat from 29 th of October 2017 to 2 nd of November 2017 which was Face to Face stage, and following the formation of the OPWP-PMP team during this stage, the team is starting the second stage in this program which is the Distance Learning. Weekly Blog is one of the tasks in this stage. The first topic of the first weekly blog is suggested by Dr.Paul which is using Tuckman’s Model to know in which phase of this model the team is operated in and which style of leadership should be adopted in order to develop the team to achieve its goals. 2-        Identify the Feasible Alternative The Forming, Storming, Norming, and Performing model of group development was first proposed by Bruce Tuckman in 1965 who maintained that these phases are all necessary in order to develop...
Read more

W1_MA_Tuckman Analysis Assignment

By -
Image
Problem Definition Bruce Tuckman model used to identify the team status and the development phase of the project team. As the team go through these phases, different strategies should be implemented by the team leader and managers. This assessment will provide enough information for the team leader and even for the team members that would give a good understand the team performance.   Identify the Feasible Alternative There were 4 stages model of "forming, storming, norming, and performing" introduced by Bruce Tuckman in 1965. However, a fifth stage was added “adjourning” which describe the phase that the team go through after the achievement of project tasks and completion of the project. Figure 1 , development stages [2] In each phase, the leadership style should be in alignment with that specific phase which enhance the development of the team and improve the performance of the team as well. There are different styles that could be used by the team le...
Read more