Recovery Decision on a Late SCADA and Electrical Upgrade
Northgate Water Authority has contracted Halden Engineering for a 12-month, $4.8M SCADA and electrical upgrade at its Riverside treatment plant. The contract carries liquidated damages of $25,000 per calendar day after the regulatory commissioning date. At the end of month 5 the project controls report shows planned value $2.00M, earned value $1.70M, actual cost $1.90M. The critical path runs through medium-voltage switchgear installation, which is six weeks behind because the supplier's factory acceptance test was rescheduled twice. The electrical superintendent proposes adding a second crew at $60,000 per week, which he believes can recover three weeks. A second option is approved overtime for the existing crew at $18,000 per week, which the scheduler estimates can recover four weeks over the remaining work but raises the rework probability from 5% to 15%. The client's operations manager has begun asking for weekly recovery plans and has hinted at invoking the damages clause.
1. Calculate the cost performance index, schedule performance index, and an estimate at completion based on cost performance. What do these tell you about the likely finish, and what caution applies to using SPI alone?
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CPI = EV/AC = 1.70/1.90 = 0.895. SPI = EV/PV = 1.70/2.00 = 0.85. A simple EAC = BAC/CPI = 4.8/0.895 = $5.36M, implying roughly $560k of overrun if current cost efficiency persists. The SPI-based duration forecast is 12/0.85 = 14.1 months, suggesting about 2.1 months late. Both are warning signs, not verdicts. SPI is cost-weighted and can look better or worse than the actual critical path; here the six-week switchgear delay is the binding constraint, and recovery depends on that path, not on average earned value. SPI also tends to drift toward 1.0 as work completes, so a linear forecast can overstate lateness. Use the schedule network and remaining durations to forecast completion, and use CPI as a trend rather than a precise prediction. The PM should re-forecast with the team, identify the remaining critical path, and present a range rather than a single date. Do not use the EAC to justify cutting scope without a formal change.
2. Compare the overtime and second-crew options on cost and schedule, including expected rework cost. Recommend one and state the conditions under which you would change the recommendation.
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Assume the electrical work package has about $400,000 of rework exposure. Raising rework probability from 5% to 15% adds 10% × $400,000 = $40,000 in expected cost. Overtime: $18,000/week × 6 weeks = $108,000, plus $40,000 expected rework = $148,000. It recovers four weeks, avoiding 28 days × $25,000 = $700,000 in liquidated damages, for a net benefit of about $552,000. Second crew: $60,000/week × 6 weeks = $360,000; it recovers three weeks, avoiding $525,000, for a net benefit of about $165,000. On this arithmetic, overtime is clearly better. But the arithmetic depends on productivity and congestion. Overtime may not sustain four weeks of recovery, and fatigue could increase defects beyond the estimate. The second crew can work parallel fronts and may recover more than three weeks if the switchgear areas are physically separated. Recommend overtime with a weekly recovery gate: if cumulative recovery falls below two weeks by the gate, add the second crew on non-conflicting fronts. Change the recommendation if the supplier accelerates delivery, if rework exceeds $60,000, or if the client grants an excusable time extension.
3. The client asks for a written recovery plan. What should it contain, and how should you handle the damages-clause conversation?
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The recovery plan should be a dated, one-page document: baseline versus current status, the critical path, the six-week switchgear delay and its cause, the chosen recovery actions with owners and dates, resource loading, decision gates, and residual risk. Include the rework exposure and the trigger for switching to the second crew. Show the regulatory deadline and the damages exposure, but do not concede that the delay is Halden's fault before the facts are established. In the client meeting, separate recovery from commercial discussion: 'Here is how we intend to protect the date; here is the notice we are required to give.' Confirm whether the supplier delay is excusable under the contract's supplier-delay or force majeure clause; if it is, issue a notice and reserve rights. If it is not, the damages conversation belongs with the commercial team. Do not promise a date the critical path cannot support. Ask for a joint recovery workshop and a single client point of contact, and record agreed actions in the decision log.