“Grantchester Arena Project”
A specialist entertainment venue management company, Arena Developments, new to operating in the United Kingdom market, is intending to purchase and develop an inner-city brownfield site as a multi-purpose leisure venue.
The exact configuration of the facility is still being developed, but it is planned to comprise an indoor sports arena capable of hosting ice hockey as well as ball sports (depending on the season) with the arena also being capable of ‘dual use’ as a concert venue.
The central arena will be augmented with restaurant, bar and concession areas for patrons to buy food, drink, sportswear and other merchandise. Provision will
also be made for private boxes within the arena for corporate dining and entertainment as well as facilities for press and broadcast media.
Arena Developments have negotiated to acquire a site in the City of Grantchester. The City Council have fully supported the idea in the expectation that the arena will provide employment opportunities and act as a magnet for visitors to the City. Additionally, they expect that there will also be an increase in business activity as a whole and increased council tax revenue.
The City’s ice hockey club, “Ice Storm” have agreed in principle to enter into a lease agreement to use the ice hockey rink together with a dedicated training gym, administrative offices, changing rooms and a ‘fan zone’.
Most of the local community are supportive of the project, in particular sports fans and concert goers. Local restauranteurs and retailers are less enthusiastic and have concerns about loss of customers for their own businesses.
Environmental groups oppose the scheme being concerned, amongst other things, of pollution during the construction phases and noise and anti-social behaviour once the venue is operational. “Blue Light” services also have concerns about safety in and around the venue and their ability to respond to any major incident should one occur.
The consultancy company for whom you work as a senior project manager has just been appointed by Arena Developments as a member of their consultancy team, responsible for the provision of governance and project management services. Your team will be led by a project director, supported by yourself and a project assistant.
Outline Delivery Plan
The client has completed negotiations to acquire the site and have also reached an ‘understanding’ with the local council with regards to scope and context for a planning application to be made.
It is expected that the project will be delivered in a series of phases:
The English League ice hockey season is scheduled to start in September 2024 with the first league game for Ice Storm expected to be on either Saturday 28 or Sunday 29 September, the fixture list having not yet been confirmed.
Financial Arrangements
Arena Development’s accounting year runs from 1 January to 31 December.
In accordance with their operating procedures, all costs for the project from 1 January 2022 until launch are regarded as a ‘project cost’ and therefore accounted for in the project budget and considered an expense in the business case.
Costs incurred to the end of December 2021 are not included, they will be funded as a business development expense.
The cost of purchasing the site will be £17.5 million, payable on the last day of March 2022.
Funding
A consortium of investment banks has agreed to fund the project in its entirety. Repayments of £27.5 million fall due on 1 January 2023 and for 4 years thereafter as five equal ‘tranches’.
Consultancy Team
The core consultancy team will be engaged for the duration of the project, commencing on 1 January 2022 until the end of the ‘soft launch’. Their fees will be £63,375 per month inclusive of expenses and disbursements.
In addition, specialist resources engaged via an employment agency will be deployed to the project site as follows:
These staff will be expected to work a 5 day 40 hour week and will have four weeks leave per year, for which they will not get paid.
Staff will receive £150 per week expenses, except for the administration assistant who will receive £50 per week.
Office accommodation for the site team in nearby offices will cost £650 per week inclusive of utilities and other expenses.
Remediation and Construction Costs
Remediation costs including site security and demolition are expected to be £18,500,000.
Arena construction costs, including site security and commissioning are expected to be £76,000,000.
Costs for concession areas will be borne by the retailers / operators concerned.
Operating Income (Revenue) Stream
Whilst there will be a small income resulting from the events to be held during the ‘soft launch’ period, these will be off-set by the small audience numbers involved and the additional costs of test management and evaluation as well as disruption to events such as test evacuation and response exercises. Phase 5, therefore is expected to be “cost neutral” with income equal to expenditure and no impact on the project budget.
Thereafter, incomes are expected to show growth as follows:
Assignment Task One Project Planning
1a. Using the data in the scenario, prepare a Gantt chart for the entire programme from inception to the end of the ‘soft launch’. You may assume the project start date is Monday 10 January 2022.
1b. Compile a detailed network diagram and Gantt chart for the Arena construction phase (phase 3). You should allow in your programme for a two week shutdown of construction activity over the year-end holiday period.
1c. Identify the critical path for the construction phase.
1d. Re-present key data in Table 3 to show task durations using Eli Goldratt’s Critical Chain approach. Show also the safety buffer for the phase as a whole. Determine how buffer time should be used either at key milestones within the construction phase or only at the end clearly stating the reasons for your choice.
1e Present a simple Gantt chart to show the critical chain approach and the buffer distribution you have selected to use.
20 marks
Assignment Task Two Budgets and Cost Planning
2a. Using the data in the scenario, prepare a fully itemised cost plan for the project to include the provision of contingencies.
2b. Determine a basis for the provision of contingency within the cost plan (for example, adopting a flat rate for the entire project or risk-related rates for different elements or phases). Make a clear recommendation, stating your reasoning.
10 marks
Assignment Task Three Project Appraisal
3a. Using the budget you prepared in task two with the income streams provided in the scenario, prepare an itemised cash flow for the project for the period 2022 to 2029 inclusive. You should consider the payment profiles for both the remediation phase (phase 2) and the main arena construction phases (phases 3 and 4). You will also need to include an estimate for the revenue receipt in Q4 2024, stating your reasoning for the figure you have chosen.
3b. Using the cash flow data, prepare an initial project appraisal and identify the Payback Period; Return on Capital (RoC); and Net Present Value of the project to support a business case for presentation to the client’s Board. Use a discount rate of 4% per annum.
3c. State any assumptions made and the commercial implications of the results presented including an accept / reject recommendation for the project as a whole
15 marks
Assignment Task Four Resource Management
As the arena construction phase nears completion in Q4 2023, the professional team have re-focussed attention on the logistics and management of phase 4 – the arena fit-out, concession areas and commissioning.
With the main contractor having left site, additional site management resources will be required to co-ordinate and control the fit-out works for each retail and food unit as well as specialist equipment to be installed in hospitality areas, the TV Studio and Media Centre.
It has been decided to recruit a number of assistant project managers to support the construction manager and safety manager plus another administration assistant.
The assistant project managers will cost £300 per day plus £100 per week expenses.
The projected breakdown structure and resource need is as follows:
4a. Prepare a resource budget for the assistant project managers and administration assistant (assume that no additional office accommodation is required).
4b. Develop a week-by-week resource histogram (column chart) showing the number of assistant project managers required.
4.c It would be desirable to limit the peak assistant project management resource to a maximum of three as the recruitment agency have expressed concern about their ability to source enough suitable candidates. Suggest how the programme might be revised to achieve this constraint and identify any consequences and the resource budget saving.
15 marks
Assignment Task Five Project Evaluation
The project director to whom you report fears that the main contractor’s schedule to construct the arena is too optimistic. Nevertheless, it is essential that the arena is complete by the end of 2023, so that there is sufficient time for the 6- month phase 4 fit out and commissioning and the 3-month ‘soft launch’ phase.
You and your project assistant have looked at the contractor’s programme and, together, determined optimistic and pessimistic durations for each activity:
5a. Analyse this data and, using the PERT technique, assess the probability of the arena construction works being completed before the end of December 2023.
5b. What conclusions do you make as a result of your findings?
10 marks
Assignment Task Six Earned Value
A progress meeting with the arena main contractor was held in February 2023 and the consultant quantity surveyor tabled a financial report on the budget expended to date (to 31 January 2023):
Using the Earned Value approach determine the following:
6a. Calculate the estimated cost of the arena construction at completion.
6b. Calculate the estimated total duration of the arena construction and identify the estimated completion date.
6c. Comment upon the results.
10 marks
Assignment Task Seven Project Monitoring and Reporting
The main contractor’s progress report, presented at the February meeting identified progress made as follows:
Analyse this information with respect to the project plan you prepared in response to task one and prepare a “traffic light” progress report indicating the status of each task on the following basis:
Red Stage in progress falling more than 5% behind plan
Amber Stage in progress (broadly in line with plan) or not yet started
Green Stage completed or at least 5% ahead of plan
7a. What conclusions do you draw?
