Indivdual assignment-MCS--Turner construction company (1).docx

Abstract This case highlights the decision dilemmas in management control system of a Construction Project Organisation. Case state’s the decision dilemma of Turner’s Territory General manager for release of contingency reserves. He states “I received a call this morning, from the owner of one of our biggest Philadelphia Philadelphia construction projects, the new Kent Square office tower. The owner wants us to release !"",""" in project savings so that the mone# will be available to him to reinvest in additional project upgrades. $ecause the job is now %"& complete, he assumes the unspent contingenc# reserve is not li'el# to be needed and should therefore be returned(  He faces the pressure from top management for releasing the contingency to earning, because of loss incurred in sale of development building. The contact ith oner is i s of saving participation type here Turner Turner ill have to share !"# of its saving to oner and only $"# of saving can be transferred to earning of turner. Project manager and superintendent ants to %eep construction contingency to ta%e safety against any unpleasant things happen in remaining $&# job. 'ilemma is that, still $&# of project is balance to complete and if turner releases the contingency saving it shares !"# to the oner and $" # goes to turner as project earning and in case if anything goes rong in the project, it has to dip in their fee to finish the job and compensate cost overrun. (t the same time, holding more can threaten relationship ith client. (nd also Pressure from top management and boss to convert contingency in earnings to meet )uarterly corporate earnings projection. p rojection. (bove all, this is a ne client for turner. *elationship is a %ey to develop and maintain. This case highlights the importance of interactive controls. About Turner construction 'uring +-&s Turner Construction Company, Head)uartered in e /or% City, as the largest building Contractor and construction management company in 0nited 1tates. Offices in 2" cities Turner served virtually all non3residential construction mar%ets. 'uring +-, Turner managed ""& active projects and completed construction valued at 42.5 billion. 'omestic operation divided into $- territories. 'ecentrali6ed 'ecentrali6ed structure. Headed by TG7.

Individual Assignment No. 02-Umesh Khamparia

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Turner construction project lasted one to three years, valued 4+& to 4$" million. Turner typically uses +&# of its on staff and &# sub3contractors. Turner negotiated by using its on estimating staff, subcontractor input and past e8perience database to estimate project costs. Oner compensated Turner on cost plus basis, 0p to G7P. Turner’s fee 9Gross earning: also stipulated and fi8ed in contract. ;or incentive on careful cost management, any savings beteen G7P and actual cost usually shared ith oner as per contract terms of saving participation.