1. Lucas Remisz Pablo Subra-Gomez ESCE 308 Fitzburg Company
Cuernavacas audit May 1997
2. Localisation: 3. Hierarchy: Head office Represented by: Ann
Block V.P.OverseasOperations Max Bierman General Construction
Manager, Cuernavaca Leopoldo Sanchez Garcia Project's chief
engineer Other employed workers Maestro Munoz Employed worker
Subcontractors workers John Pekins Assistantof Mr. Max Bierman 4.
Actual situation in terms of cost & achievement: 0 5 10 15 20
CostinM +46%
May.97April.97Mar.97Feb.97Jan.97Dec.96Nov.96Oct.96Sept.96Aug.96 76%
48% 38% 25% 15%10%5% 82% 72% 61% 53%50%45% 35% 15%10% 58% 23% 5%2%
0% 20% 40% 60% 80% 100% Achievement
May.97April.97Mar.97Feb.97Jan.97Dec.96Nov.96Oct.96Sept.96Aug.96
Observed Forecast Forecasted and observed achievement of the
project between August 1996 and May 1997: Forecasted and observed
cost of the project between August 1996 and May 1997: Observed
Forecast 5. Existing Situation: There is some major problems in
terms of : -Communication -Intercultural Differences -Ethic
Differences -Management 6. Communication: John and Bierman dont
have any experience in Mexico. They try to work in Mexico as they
would do in the US. 7. Intercultural Differences: Americans are
more close minded They have an individualist culture They pay more
attention to cost saving processes rather than focusing on quality.
Mexicans accord more importance to tradition They are attached to
the group, and solidarity La siesta is very important to Mexicans
workers. 8. Ethic Differences: TheAmerican managers always try to
find out what the Mexicans workers could have done wrong. They tend
to blame only one worker Whereas the Mexicans Managers try to share
the fault, and avoid conflict. 9. Management: There is less
dialogue between American managers and the workers They want to do
it the American way, instead of adapting themselves. 10. Statement
of the problem: Difficulties in the management of all those factors
led to problems of costs and delays 11. Option 1: status quo
Measures to take Intermediary impacts Possible risks High number of
errors Supplementary purchase of raw-materials High increase of
costs and delays High negative financial impacts (lower margin,
lower profitability of the investment, late positive cash flows)
87.5% 12. 30M 90% 100% 20M 40M 80% 30% 10M 5M 60% 70% 35M 50% 40% 0
25M 20% 15M 10% 0 Mar.98Oct.97Sept.97Aug.97July.97June.97May.97
Achievement Cost 36M Jan.98Nov.97 Feb.98Dec.97 100% Cost curve
Achievement bars Forecasted cost and achievement of the project
following option 1 between August 1996 and May 1997: 13. Option 2:
Tighter supervisory control by a Mexican manager Measures to take
Intermediary impacts Possible risks Hire a mexican engineer (the
supervisor) Establish a daily control & report Training of the
workers Decrease of construction errors Increase of productivity
Increase of costs and delays Negative financial impacts (lower
margin, lower profitability of the investment, late positive cash
flows) 75% 14. 20M 10M 20% 30M 32M 34M 4M 6M 2M 8M 16M 18M 22M 24M
26M 12M 14M 28M 100% 10% 00 50% 90% 80% 70% 60% 40% 30% Cost
Achievement Feb.98 34M
Jan.98Dec.97Nov.97Oct.97Sept.97Aug.97July.97June.97May.97 100% Cost
curve Achievement bars Forecasted cost and achievement of the
project following option 2 between August 1996 and May 1997: 15.
Option 3: Tighter supervisory control & pressure by John
Perkins Measures to take Intermediary impacts Possible risks
Convert the siesta break (90) in a 30min lunch break Establish a
daily control & report Establish a climate of pressure on
workers about deadlines Negative relations between workers &
the management Decrease of construction errors High Increase of
productivity Strike of workers 60% 16. 50% 60% 30% 40% 70% 20% 10%
0 0 15M 90% 25M 10M 5M 35M 20M 30M 80% 100% Oct.97 Nov.97 Dec.97
Jan.98 100% Cost Achievement 33M May.97 July.97 Aug.97
Sept.97June.97 Achievement bars Cost curve Forecasted cost and
achievement of the project following option 3 between August 1996
and May 1997: 17. Option 4: Increase workers personal implication
Measures to take Intermediary impacts Possible risks Offer to
workers: the possibility to work longer with the same salary
Significant bonus for the most productive workers Some opponents
High increase of productivity Low increase of staff cost
Resignation of severals workers / sub-contractors 75% 18. 20M 15M
45M 40M 35M 30M 25M 10M 10% 5M 50M 80% 100% 0 0 70% 90% 60% 50% 40%
30% 20% Cost Achievement Nov.97 50 M
Oct.97Sept.97Aug.97July.97June.97May.97 100% Achievement bars Cost
curve Forecasted cost and achievement of the project following
option 4 between August 1996 and May 1997: 19. Option 5: Hiring
Measures to take Intermediary impacts Possible risks Hiring 30
unskilled workers Hiring 4 young engineers (to supervise sub-
contractors) Decrease of construction errors High increase of staff
cost High increase of the constructions speed Supplementary
unexpected delays due to the training of the newly hired staff 75%
20. 25M40% 50% 35M 40M 45M 50M 55M 60M 0 90% 100% 10% 80% 70% 5M
60% 30% 30M 20% 20M 15M 10M 0 Achievement
Oct.97Sept.97Aug.97July.97June.97 100% 58M May.97 Cost Achievement
bars Cost curve Forecasted cost and achievement of the project
following option 5 between August 1996 and May 1997: 21.
Recommendations: Reduce delays Reduce costs Option 5 Option 3
