Engineering Management 3000 - Semester 2 2016 Assignment Page 1 MGMT 3000 Assignment Semester 2 - 2016 Proposed Max Light Rail Project MAX Light Rail Metro Area Express, or MAX, is Perth's proposed 21 km light rail network that will run from Mirrabooka in the north to the CBD, before splitting into two branches to Victoria Park Transfer Station in the east (via the Causeway) and to QEII Medical Centre in the west (via West Perth). This visionary project will introduce a new era of public transport in Perth, supporting the city's transformation by providing a frequent, high-capacity service in the inner-north and central west and eastern suburbs of Perth. Imagine that you are employed with the Western Australian Department of Transport (DoT) and you have been assigned to work with the engineering planning team on the proposed new Max Light Rail Project. The estimated total cost of the new Max Light Rail Project is estimated to be $1 billion in today's dollars. It is expected that a total of 350,000 people will use the new Max Light Rail on an annual basis. Revenue will be generated via ticket sales and from onboard advertising. Expected Revenue from onboard advertising $4000/ day Table 1aEngineering Management 3000 - Semester 2 2016 Assignment Page 2 There will be three types of tickets that can be purchased. The price will vary depending on the length of your journey. Refer to table 1b below. Ticket Type (One way) Expected Percentage of Population Usage Cost per ticket per person (One way) >= 14km 60% $3*N >7 km and < 14 km 26% $2*N < = 7km 14% $N Table 1b Financing Structure of the Project Funding for the project is expected to come from the State Government using a mix of existing and borrowed funds. The government has $900m in cash already allocated for this project, thus the $900m is not to be considered as part of this analysis. The state government intends to make up the shortfall by borrowing the $100m with an annual interest rate of 2.5% to finance the project. The borrowed funds will help cover the cost of the preparation of all the documentation, contracts, public consultation, the tendering process, the actual construction and commissioning. It is envisaged that some of the borrowed funds will also in part cover, staff wages and the ongoing operation and maintenance costs. The proposed financing arrangement for the loan is to be financed over a 50 year period. The government has stipulated that the initial project scoping must start on the 1st of Jan 2017 and has stated that the project is to break even at the end of the 50 year period. This goal is to be achieved from revenue generated via the ticket sales and from onboard carriage advertising while also taking into account expected annual ongoing maintenance and operational and costs. The Government requires that the cost of a ticket must be affordable and has stipulated a constraint that a one way ticket price must be set to less than or equal to $3 per ticket. A second constraint stipulates that the project must break even in less than or equal to 50 years. Note that the loan drawdown profile of the borrowed $100m total, follows the typical project lifecycle "S curve" expenditure distribution as given in Table 2 below. Year of Loan Drawdown Expected Loan Drawdown Profile By the end of 1st Year Expected drawdown is 18% of total loan amount. By the end of 2nd Year Expected drawdown is 24% of total loan amount. By the end of 3rd Year Expected drawdown is 36% of total loan amount. By the end of 4th Year Expected drawdown is 16% of total loan amount. By the end of 5th Year Expected drawdown is 6% of total loan amount. Table 2 Note that the revenue stream can only start once the rail system is built, commissioned and handed over. For simplicity work on an annual basis .Engineering Management 3000 - Semester 2 2016 Assignment Page 3 The expected annual costs associated with the ongoing maintenance and operational costs (in today's dollars) are listed table 3 below. These costs commence only once the Max Light Rail is commissioned. Operations and Maintenance Item Expected Annual Costs Ongoing Track and Carriage Maintenance $150,000 Table 3 Appendix Information In the appendix you have been given tables of the work breakdown structures covering the expected Electrical, Mechanical and the Communications / IT engineering scope of works. You have also been given a table of the Master Plan for the project. Task List Your team has been asked to determine what a one way ticket price needs to be set to, in order to be able to break even at the end of a 50 year time frame. To help you to provide a response to this request you are required to present the following in your formal report to the government: 1. Draw the Gantt charts pertaining to each of the Work Breakdown Structures for the Mechanical, Communication / IT and Electrical scope of work components as per tables 5, 6 and 7 respectively. (Note: The Gantt charts can be hand drawn but no free hand drawings are acceptable as this is a formal report. All charts are to be clearly labeled and show total time duration in weeks. ) [24 Marks] 2. Draw an AOA diagram for the of the Electrical Engineering scope of works, starting from and including activity "AE" up to and including activity "OE". Refer to table 7. [10 Marks] a. Find the critical path and determine its duration. [2 Marks] b. Find the shortest path and determine the slack. [2 Marks] c. State by how many weeks the relocation of all existing electrical infrastructure could be delayed by, without affecting the completion time of the overall Electrical Engineering component of the project. [2 Marks] d. State by how many weeks the upgrade of existing substations and installations of new transformers and switch gear could be delayed by, without affecting the completion time of the overall Electrical Engineering component of the project. [2 Marks] e. Similarly, by how many weeks could the termination of the primary incoming 66kV overhead feeders be delayed by, without affecting the project duration time? [2 Marks] Operations and Maintenance Costs Task TaskEngineering Management 3000 - Semester 2 2016 Assignment Page 4 3. Using the data given in Table 4 of the Appendix and incorporating information attained from question 1, draw the complete Gantt chart of the "Master Plan" for this project. [8 Marks] 4. Using the now completed Table 4 determine the overall expected project completion time from the initial tender, "Activity A" to the commissioning and handover of the complete project, "Activity K ". Clearly state how many weeks in total it will take to build and commission the light rail project. This is a critical number as it will determine when the project can commence earning revenue. Derive the total revenue equation. [8 Marks] 5. Draw the pre-tax cash flow diagram for the total project taking into account all relevant cash inflows and outflows. [10 Marks] 6. Given that the project is to break even at the end of 50 years, determine the value of a one way ticket price, $N if the government can negotiate an interest rate of 2.5%. (Show your working) Is this in breach of a government constraint for the project? [20 Marks] 7. Alternative Scenario: Assume the government at short notice, can at best negotiate to borrow the funds at an interest rate of 3%. By setting the price of a one way ticket $N = $3, calculate how many years it would take to break even. (Show your working) Is this in breach of a government constraint for the project? [20 Marks] 8. You are asked to look at a further scenario, where the government wants to set the price of a one way ticket to $N = $2.50 Given that the project must break even at the end of 50 years, calculate what interest rate must be negotiated, to achieve this. Give your answer to an accuracy of six decimal places. (Show your working) [20 Marks] 9. Part of your role is to select the engineering contracting company to carry out the build of the Electrical, Mechanical and Comms IT construction work. The list of accredited tenderers has been narrowed down to two companies. Both companies have provided their respective financial statements for the past two fiscal years. Refer to Appendix 2. Calculate the solvency, liquidity and profitability ratios for each company (for both financial years) and display your workings. Based on your calculations in 500 words or less make your recommendation as to which company would be better placed to undertake this project. In your own words clearly explain your reasoning. [35 Marks] 10. Team Formation. [10 Marks] • Form your own team of three people that you wish to work with. • Refer to the notes on Team Development and Organising teams. In particular the "five stage group model" of team formation and "leadership" respectively. • Elect a team leader. It is the team leader's role to ensure that all team members hand in their assignment on time. • Define clearly amongst yourselves who is doing what and by when. • If you are the team leader: In your own words write a short paragraph (50 – 100 words) on the power tactics that you used to motivate and influence your group's behaviour. Highlight which tactic worked best for you. Your Tasks List Continued ……. Task Task Task Task Task Task Task TaskEngineering Management 3000 - Semester 2 2016 Assignment Page 5 Task 10 Continued ……. • If you are a team member: In your own words write a short paragraph (50 – 100 words) on the power tactics that your team leader used to motivate and influence the group's behaviour. Comment on the tactic's effectiveness. Also comment on if you had been the team leader, describe if you would have used the same or a different tactic to motivate the team. Assignment Requirements 1. The Assignment is due COB Friday the 23rd of September 2016. 2. The Assignment is worth 20% of the total MGMT 3000 unit mark. 3. It is to be handed in to the assignment office and later collected from the assignment office. 4. Your report must have a signed cover sheet from the assignment office. 5. Each team member is to hand in a complete report in his/her own name with its own cover page. Each report will be marked individually. It is quite OK to have your own independent views. You don't have to agree with your team member's view(s). 6. As this is a professional report for the government, nothing in the report is to be drawn free hand. All diagrams must be either printed of ruled up and/or stenciled. Only ink pen is to be used. All charts and diagrams are to be clearly labeled. Any main paragraphs of text must be typed. 7. Calculations can be hand written (neatly) and must be shown. Label which task you are answering. 8. A total of 10 marks will be allocated for the overall presentation of the assignment. 9. Late assignments – will incur a daily 10% penalty deduction off the total mark. 1. Assignment Office Registration Cover Page 2. Your Cover page – With Name and student ID numbers of all team members and who the leader was. 3. Introductory paragraph (in your own words) An executive summary outlining what this report will address. (50 – 100 words) [5 Marks] 4. Your answers to each of the ten tasks. Include all charts and calculations. Each task you are answering must be numbered. [175 Marks - For tasks 1 to 10. Refer to task list for breakdown] 5. Concluding paragraph (in your own words) summarising your results. (50 – 100 words) [5 Marks] 6. Paragraph (in your own words) of the power tactics that were used and their effectiveness. (50 – 100 words) [5 Marks] 7. Assignment Presentation [10 Marks] (Remember this is a formal report) Total possible assignment marks = [200 Marks] When handing in your report: • Your reports must be handed in together with your other team members reports. Place the team leader's report on top. This can be done by either of two ways: o You may have all three reports inserted in the one plastic sleeve, or, o You can have three plastic sleeves all tied together in one corner. o When collecting your reports from the assignment office you will need to know your team leaders name as they will be catalogued under your team leader's name. Report Format and Mark BreakdownEngineering Management 3000 - Semester 2 2016 Assignment Page 6 The Master Plan - Construction of Perth Max Light Rail Activity Description Predecessors Weeks* A Prepare concept plan broad scope of the project Start 1/Jan/2017 16 B Seek Public Consultation and stakeholder engagement A 5 C Prepare Business Case and Obtain Environmental Approvals B 8 D Commence and Close the Tender Period C 11 E Analyse and award contract to the winning tenderer. D 10 F Finalise and submit the detailed design of the Civil, Electrical, Mechanical and the Comms IT engineering works and wait for final approvals. E 23 G Ordering of all materials required for the Civil, Electrical, Mechanical and the Comms IT engineering works F 25 H Ordering of the carriages for the light rail project F 16 I Completion of the Construction Phase – for all the Civil scope of works G 45 J Completion of the Construction Phase – for all Electrical, Mechanical and the Comms IT engineering scope of works I TBD^ K Final Commissioning and Project Handover of the total project and commemorate with the Premier at a ribbon cutting ceremony J 5 Table 4 TBD^ - To be determined from the WBS tables 5, 6 & 7 in appendix Appendix 1Engineering Management 3000 - Semester 2 2016 Assignment Page 7 Activity Description Predecessors Weeks* AM Confirm order all materials from the design bill of quantities I (Master Plan) 2 BM Catalogue and deliver all materials to appropriate sites AM 1 CM Mobilise personnel to site office(s) BM 2 DM Install the rail tracks to specifications CM 13 EM Install rail sidings CM 6 FM Install track interchange infrastructure DM 7 GM Install all control and signaling equipment along the rail line DM,EM,FM 11 HM Install all the boom gates as per the design DM 8 IM Install the required control and signaling software for the master control room HM 12 JM Test the rail tracks under load with actual carriage GM 4 KM Confirm max carriage speed allowable along the rail route JM 6 LM Test the air-conditioning system on each carriage and test the onboard fire sprinkler systems. KM 4 NM Final testing commissioning and formal handover LM 5 Table 5 WBS Communications and IT Engineering Scope of Works Activity Description Predecessors Weeks* AT Confirm order all materials from the design bill of quantities I (Master Plan) 2 BT Catalogue and deliver all materials to appropriate sites AT 1 CT Mobilise personnel to site office(s) BT 2 DT Relocate all existing telecommunications infrastructure along the proposed rail route as required by the design CT 14 ET Install optic fiber along the route and connect to the Telstra network DT 6 FT Install the router system enabling wireless internet access ET 9 GT Installation of mobile towers and antennas as required ET 10 HT Install GSM4 mobile equipment racks as existing Telstra exchanges and the mobile towers GT,ET 4 IT Setup the backup comms network for the train drivers to talk to the main control room HT 2 JT Install the security microphone and speaker system at the stopping stations ET 7 KT Install the remotely controlled security cameras with live feed back to the control room. IT 3 LT Final testing commissioning and formal handover KT 4 WBS Mechanical Engineering Scope of Works Table 6Engineering Management 3000 - Semester 2 2016 Assignment Page 8 Activity Description Predecessors Weeks* AE Confirm order all materials from the design bill of quantities I (Master Plan) 2 BE Catalogue and deliver all materials to appropriate sites AE 1 CE Mobilise personnel to site office(s) AE 2 DE Relocate all existing electrical infrastructure along the proposed rail route as required by the design CE,BE 5 EE Build the 66kV substations along the route as per the design DE 9 FE Terminate the primary incoming 66kV overhead feeders from Western Power to the new substations EE 4 GE Terminate the second 66kV cable for from Western Power for power robustness. This diverse cable is for power reliability in the event of a fault on the primary cable DE 3 HE Equip the switch room with the main switchboard and protection fuses and circuit breakers at the sub stations EE 7 IE Install all sub switchboards HE 4 JE Install the uninterruptable power supply equipment in the main switch room IE 6 KE Install all the wiring reticulation along the route for supply to the boom gates and signaling controls FE,JE 9 LE Install the protection equipment in the mini sub station KE 5 ME Upgrade existing substations and install new transformers and switch gear as required GE,EE 14 NE Install all lighting poles along the rail line including the security lighting at the various stopping stations. LE,ME 6 OE Final testing commissioning and formal handover NE 5 Table 7 *Assume 52 weeks per year (i.e. no holiday gaps due to shift work arrangements) and the one week is seven days. Also assume one year is equal to 365 days exactly. WBS Electrical Engineering Scope of WorksEngineering Management 3000 - Semester 2 2016 Assignment Page 9 Creative Contractors AAA - Income Statement ($AUD x 1000) Fiscal Year ending 30-Jun-15 30-Jun-14 Net Revenue 34,575 30,102 Cost of Good Sold 28,500 25,786 Gross Margin 6,075 4,316 Other Income Investment A 31 25 Investment B 64 52 Investment C 58 19 Total Income from Investments 153 96 Operating Expenses Selling, General & Admin 2,794 2,294 R&D and Engineering 345 419 Special Charges 7 45 Total Operating Expenses 3,146 2,758 EBITDA 2,929 1,558 Depreciation and Amortisation 110 235 EBIT 2,819 1,323 Interest 75 98 Provision for Income Tax 450 502 Net Profit / Income 2,447 819 Appendix 2Engineering Management 3000 - Semester 2 2016 Assignment Page 10 Fiscal Year ending 30-Jun-15 30-Jun-14 Cash flow from Operating Activities Net Income 2,447 819 Depreciation and Amortisation 110 235 Changes in Working Capital 901 893 Changes in Non-Current Assets & Liabilities 108 87 Special charges and other adjustments -98 635 Net cash provided by Operating Activities 3,468 2,669 Cash flow from Investing Activities Marketable Securities Purchases -4,006 -4,736 Sales 3,642 2,956 Capital Expenditure -154 -152 Net Cash Used in Investing Activities -518 -1,932 Cash flow from Financing Activities Purchase of Common Stock -1135 -1935 Issuance of Common Stock to Staff 245 265 Net Cash Used in Investing Activities -890 -1670 Effect of exchange rate changes in cash -120 +60 Net Increase in Cash 1,940 -873 Cash at the beginning of the period 469 1,342 Cash at the end of the period 2,409 469 Creative Contractors AAA - Cash Flow Statement ($AUD x 1000)Engineering Management 3000 - Semester 2 2016 Assignment Page 11 Fiscal Year ending 30-Jun-15 30-Jun-14 Current Assets Cash (at end of period) 2,409 469 Short Term Investments 205 154 Accounts Receivable 1208 987 Inventories 139 127 Other 950 801 Total Current Assets 4,911 2,538 Non - Current Assets Property, Plant & Equipment 850 980 Long Term Investments 3209 2897 Other 148 256 Total Non Current Assets 4,207 4,133 Total Assets 9,118 6,671 Current Liabilities Accounts Payable 1500 1807 Accrued and other 2500 1306 Total Current Liabilities 4,000 3,113 Non - Current Liabilities Long Term Debt 1131 989 Total Non Current Liabilities 1,131 989 Total Liabilities 5,131 4,102 Equity Preferred stock 703 440 Common Stock and Capital 1788 1253 Retained Earning 1496 876 Total Equity 3987 2569 Creative Contractors AAA - Balance Sheet ($AUD x 1000)Engineering Management 3000 - Semester 2 2016 Assignment Page 12 Net Revenue 34,564 29,845 Cost of Good Sold 29,105 24,538 Gross Margin 5,459 5,307 Other Income Investment A 31 20 Investment B 64 41 Investment C 23 16 Total Income from Investments 118 77 Operating Expenses Selling, General & Admin 2,894 2,500 R&D and Engineering 425 419 Special Charges 7 3 Total Operating Expenses 3,326 2,922 EBITDA 2,133 2,385 Depreciation and Amortisation 198 480 EBIT 1,935 1,905 Interest 39 45 Provision for Income Tax 975 502 Net Profit 1,039 1,435 Total Contractors BBB - Income Statement ($AUD x 100) Fiscal Year ending 30-Jun-15 30-Jun-14Engineering Management 3000 - Semester 2 2016 Assignment Page 13 Cash flow from Operating Activities Net Income 1,039 1,435 Depreciation and Amortisation 198 480 Changes in Working Capital 901 893 Changes in Non-Current Assets & Liabilities 108 87 Special charges and other adjustments -98 635 Net cash provided by Operating Activities 2,148 3,530 Cashflow from Investing Activities Marketable Securities Purchases -4,006 -4,736 Sales 3,642 2,956 Capital Expenditure -154 -152 Net Cash Used in Investing Activities -518 -1,932 Cash flow from Financing Activities Purchase of Common Stock -1135 -1935 Issuance of Common Stock to Staff 245 265 Net Cash Used in Investing Activities -890 -1670 Effect of exchange rate changes in cash -120 +60 Net Increase in Cash 620 -12 Cash at the beginning of the period 1,330 1,342 Cash at the end of the period 1,950 1,330 Total Contractors BBB - Cash Flow Statement ($AUD x 1000) Fiscal Year ending 30-Jun-15 30-Jun-14Engineering Management 3000 - Semester 2 2016 Assignment Page 14 Current Assets Cash (at end of period) 1,950 1,330 Short Term Investments 205 154 Accounts Receivable 1208 987 Inventories 142 131 Other 0 600 Total Current Assets 3,505 3,202 Non - Current Assets Property, Plant & Equipment 850 980 Long Term Investments 3209 2897 Other 148 256 Total Non Current Assets 4,207 4,133 Total Assets 7,712 7,335 Current Liabilities Accounts Payable 2089 2000 Accrued and other 1456 1400 Total Current Liabilities 3,545 3,400 Non - Current Liabilities Long Term Debt 1250 1000 Total Non Current Liabilities 1,250 1,000 Total Liabilities 4,795 4,400 Equity Preferred stock 452 806 Common Stock and Capital 969 1253 Retained Earning 1496 876 Total Equity 2917 2935 Total Contractors BBB - Balance Sheet ($AUD x 1000) Fiscal Year ending 30-Jun-15 30-Jun-14