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    Project Cost & Time Management: CASE STUDY: Franklin Electronics

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    Abanoub Sargious
    Franklin Electronics won its first cost reimbursable contract from Spokane Industries to develop a new product over 18 months using project management. Franklin was required to provide earned value reports, but had little experience with this. The first report showed cost and schedule variances increasing, prompting the sponsor to threaten cancellation. However, the report lacked necessary context and Franklin's understanding of earned value was limited.

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    Project Cost & Time Management: CASE STUDY: Franklin Electronics

    Uploaded by

    Abanoub Sargious
    262 views2 pages
    Franklin Electronics won its first cost reimbursable contract from Spokane Industries to develop a new product over 18 months using project management. Franklin was required to provide earned value reports, but had little experience with this. The first report showed cost and schedule variances increasing, prompting the sponsor to threaten cancellation. However, the report lacked necessary context and Franklin's understanding of earned value was limited.

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    CS4 costtime MNG - FRANKLIN ELECTRONICS

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    Franklin Electronics won its first cost reimbursable contract from Spokane Industries to develop a new product over 18 months using project management. Franklin was required to provide earned value reports, but had little experience with this. The first report showed cost and schedule variances increasing, prompting the sponsor to threaten cancellation. However, the report lacked necessary context and Franklin's understanding of earned value was limited.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    262 views2 pages

    Project Cost & Time Management: CASE STUDY: Franklin Electronics

    Uploaded by

    Abanoub Sargious
    Franklin Electronics won its first cost reimbursable contract from Spokane Industries to develop a new product over 18 months using project management. Franklin was required to provide earned value reports, but had little experience with this. The first report showed cost and schedule variances increasing, prompting the sponsor to threaten cancellation. However, the report lacked necessary context and Franklin's understanding of earned value was limited.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    PROJECT MANAGEMENT

    PROJECT COST & TIME MANAGEMENT


     

    CASE STUDY : Franklin Electronics


    In October 2003 Franklin Electronics won an 18-month labor-intensive product development contract awarded by
    Spokane Industries. The award was a cost reimbursable contract with a cost target of $2.66 million and a fixed fee
    of 6.75 percent of the target. This contract would be Franklin’s first attempt at using formal project management,
    including a newly developed project management methodology.

    Franklin had won several previous contracts from Spokane Industries, but they were all fixed-price contracts with
    no requirement to use formal project management with earned value reporting. The terms and conditions of this
    contract included the following key points:

    ● Project management (formalized) was to be used.

    ● Earned value cost schedule reporting was a requirement.

    ● The first earned value report was due at the end of the second month’s effort and monthly thereafter.

    ● There would be two technical interchange meetings, one at the end of the sixth month and another at
    the end of the twelfth month.

    Earned value reporting was new to Franklin Electronics. In order to respond to the original request for proposal
    (RFP), a consultant was hired to conduct a four-hour seminar on earned value management. In attendance were
    the project manager who was assigned to the Spokane RFP and would manage the contract after contract award,
    the entire cost accounting department, and two line managers. The cost accounting group was not happy about
    having to learn earned value management techniques, but they reluctantly agreed in order to bid on the Spokane
    RFP. On previous projects with Spokane Industries, monthly interchange meetings were held. On this contract, it
    seemed that Spokane Industries believed that fewer interchange meeting would be necessary because the
    information necessary could just as easily be obtained through the earned value status reports. Spokane appeared
    to have tremendous faith in the ability of the earned value measurement system to provide meaningful information.
    In the past, Spokane had never mentioned that it was considering the possible implementation of an earned value
    measurement system as a requirement on all future contracts.

    Franklin Electronics won the contact by being the lowest bidder. During the planning phase, a work breakdown
    structure was developed containing 45 work packages of which only 4 work packages would be occurring during
    the first four months of the project.

    Franklin Electronics designed a very simple status report for the project. The table below contains the financial data
    provided to Spokane at the end of the third month.

    Table 1 Earned Value data for the project (data in thousands of $) 

    TOTALS AT END OF MONTH 2 TOTALS AT END OF MONTH 3


    WP’s
    PV EV AC CV SV PV EV AC CV SV
    WP1 38 30 36 -6 -8 86 74 81 -7 -12
    WP2 17 16 18 -2 -1 55 52 55 -3 -3
    WP3 26 24 27 -3 -2 72 68 73 -5 -4
    WP4 40 20 23 -3 -20 86 60 70 -10 -26
     

     
    PROJECT MANAGEMENT

    A week after sending the status report to Spokane Industries, Franklin’s project manager was asked to attend an
    emergency meeting requested by Spokane’s vice president for engineering, who was functioning as the project
    sponsor. The vice president was threatening to cancel the project because of poor performance. At the meeting,
    the vice president commented, “Over the past month the cost variance overrun has increased by 78 percent from
    $14,000 to $25,000, and the schedule variance slippage has increased by 45 percent from $31,000 to $45,000. At
    these rates, we are easily looking at a 500 percent cost overrun and a schedule slippage of at least one year. We
    cannot afford to let this project continue at this lackluster performance rate. If we cannot develop a plan to control
    time and cost any better than we have in the past three months, then I will just cancel the contract now, and we will
    find another contractor who can perform.”

    Issues for work and discussion

    1. Are the vice president’s comments about cost and schedule variance correct?

    2. What information did the vice president fail to analyze?

    3. What additional information should have been included in the status report?

    4. Does Franklin Electronics understand earned value measurement? If not, then what went wrong?

    5. Does Spokane Industries understand project management?

    6. Does proper earned value measurement serve as a replacement for interchange meetings?

    7. What should the project manager from Franklin say in his defense?

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