Mini-Project (Third) - Essay Example

This made Cashman “forced to scramble for an additional line of credit in project financing at prime plus 2-1/2%”, which was an excessive premium (due to Woody’s credit rating). Proper budgeting would have avoided the ‘fire fighting’ mode they had to resort to when they found themselves “throwing money at every problem in an effort to get the plant operational”. The project failures concerning financial planning, cash flow, cost control, costs incurred etc. are listed in section two.

Recommendations are then given on how this should have been conducted properly so that the mistakes could have been avoided. Kim Cashman’s cash flow chart was improperly drafted. The amount of expenditure was only assumed i.e. £1 million each in first and last months and £1.4 million in each intervening 10 months. Secondly, the chart was locked away and the details were not divulged to the people concerned. The costs associated with the project were recorded as part of the company’s normal book-keeping whereas it should have been kept separate not least because the costs could be easily identified and controlled.

EID’s initial fixed-price quotation was not deliberated upon. It could have been a more economical option than allowing the cost plus alternative that EID implemented with a high level of uncertainty. Moneysworth did not justify why he thought that the hourly rate was reasonable. He also thought that the hours could be monitored effectively but this proved not to be the case. The hourly rate was perhaps the largest contributor to the spiralling costs. Changes in project planning led to costs becoming uncontrollable and some of these were major.

For example, software for the production train had to be rewritten and the building could not house the production train. The lack of schedule planning not only wasted time and caused delays but also resulted in the loss of income. For example, the several weeks that were lost in