STUDENT ID NO:_______________

PAGES: 13

UNIVERSITY OF TASMANIA

EXAMINATION FOR DEGREES AND DIPLOMAS October/ November 2010

KNE301 Engineering Project Management and Economics First and Only Examination EXAMINERS: Professor Don Chalmers Mr E. Albertini Mr P. Hollinsgworth Ms N. Walters COORDINATOR: Professor Chris Letchford

Time allowed: THREE hours. Instructions: Answer ALL QUESTIONS Answer each PART in a SEPARATE BOOK. Answer Part A on the Exam Paper Marks for each Part/Question are indicated. PART A: PART B: PART C: 20 marks 40 marks 20 marks Continued

EXAM TOTAL: 80 marks

Part A: Engineering Law (20 marks, mark each question) (ANSWER ON THIS EXAM PAPER) INCORRECT MULTIPLE CHOICE ANSWERS WILL ATTRACT A NEGATIVE MARK OF -0.5.
A.1: The legal system of Australia derives from: - (circle one) a) b) c) English Common Law The Roman legal system A combination of Roman and English Common Law

A.2: The Common Law and Civil Law systems of Europe and Asia are becoming similar but the major difference between them consists of: - (circle one): a) b) c) d) Professional legal ethics Legislation Opinions of law professors Case law decisions of judges

A.3: The international conventions are becoming more important and differ from international declarations because: - (circle one) a) b) c) d) Conventions require the signatory country to bring in domestic legislation Declarations always come before a Convention Conventions take longer in development than declarations Conventions can be changed by the signatory country

A.4: Which of the following are advantages of legislation over case-law? (circle those that apply) a) b) c) d) Establish a new area for example Privacy law Repeal of old law and introduction of new law Easier to make changes than in case law Parliaments take too long to bring in new law

A.5: Professional engineers may give expert evidence in court, and, when they do, they are required to :- (circle one) a) b) c) d) Give their opinion without any preparation Give their opinion supporting the government Give their opinion independently and without bias Give their opinion favouring the person paying their fee Continued
Page 2

A.6: Professional Engineers must act ethically. Which of these is not an ethical duty? (circle one) a) b) c) d) Place community welfare, health and safety before private interests act with honour, integrity, dignity for trust of community/profession continue professional development, when requested by a client encourage other engineers to act with honesty, good faith and equity & without discrimination

A.7: In negotiations, care must be taken with comments made. These comments may be enforceable later by a party by way of estoppel (circle one) a) b) a) b) True False True False

Or Waiver. (circle one)

A.8: Briefly explain what is meant by cooperative contracting in the ABIC MW-2008 Contract

A.9: Under the ABIC MW-2008 Contract the owner and the engineer, as consultant, are both parties to the Contract (circle one) a) b) True False

A.10: Is a letter of comfort from a company about its subsidiary generally not enforceable in court? (circle one) a) b) True False

Continued
Page 3

A.11: Briefly explain what is meant by the term frustration in the law of contract.

A.12: In the case of Codelfa, why was the contract found to be frustrated rather than only more difficult to complete.

A.13: In Hollier v Rambler Motors an exclusion clause on an invoice read: The company is not responsible for damage caused by fire to the customers cars on the premises. Was this exclusion clause effective? (tick one) a) b) Yes No

A.14: Contracts may have terms implied by the court under which, if any, of the following circumstances :- (circle those that apply) a) b) c) d) Where the implied term represents the past dealings between the parties Implied from customs common in the particular type of contract (commercial, building, insurance) Whenever a party requests the court to imply a term Whenever a judge feels that it is useful

A.15: If a contract includes an uncertain term, the courts decide the meaning on a term :(circle one) a) b) Based on what each party claims is their understanding of the term Objectively, looking at all the surrounding circumstances

Continued
Page 4

A.16: Contracts may include an exclusion clause which, if any, apply? :- (circle one) a) b) c) The onus of proof is always on the party seeking to rely on the exclusion clause An exclusion clause is always ignored by the court It is always presumed that the clause will include negligent conduct

A.17: Rise and fall clauses in building contracts are included to cover fluctuations in prices. (tick one) a) b) . A.18: Briefly explain what is meant by a provisional sum in a standard form building and engineering contract. True False

A.19: Building management contracts have some of the following features (circle those that are correct) :a) b) c) d) The manager controls the costs in the interests of the proprietor The manager coordinates different contractors The manager is hired for a fee A building management contract is very similar to a cost plus contract

A.20: Under major works contract ABIC MW-2008 public liability insurance must be taken out by :- (circle one) a) b) c) The owner The contractor It depends on who is named in the contract

Continued
Page 5

A.21: Briefly explain what is meant by a lump sum contract for building or engineering works.

A.22: Briefly explain, what you believe to be the two or three most important aims to be of effective contract negotiations?

A.23: Under ABIC MW-2008, a quality assurance system must be included in the contract under clause G2.2 (circle one) a) b) True False

A.24: Under ABIC MW-2008, if the percentage of the contractors overheads and profits are not stated, the sum is 10% (circle one) a) b) True False

A.25: Under ABIC MW-2008, the contractor always has to carry the cost of lost working days from bad weather conditions. (circle one) a) b) True False

A.26: Briefly explain what is meant by practical completion under clause M1 of the ABIC MW-2008.

Continued
Page 6

A.27: Briefly explain what is meant by the defects liability period in standard form building and engineering contracts under clause M16 of the ABIC MW-2008.

A.28: The duties of a professional engineer are to :- (circle one) a) b) c) Perform all duties to the very highest standards considered by a court of law Perform to a standard reasonably expected of professional engineers with equivalent experience and competence Perform according to the standards of a newly registered professional engineer with two years experience

A.29: In Woolcock Street Investments v. CDG in 2004, a consulting engineer did not identify a latent (hidden) defect in the foundations, which was also not disclosed in the local council certificate. Was the consulting engineer liable? (circle one) a) Yes b) No A.30: Where contributory negligence is found by the court :- (circle one) a) b) c) The plaintiffs action will be dismissed The defendant will have a complete defence against the action of the plaintiff Damages will be assessed according to the contribution to the plaintiffs own harm

A.31: The nature of an action for private nuisance does not require actual physical damage but only an interference with the enjoyment of the property? (tick one) a) b) True False

A.32: Which, if any, of the following, are duties of an employer towards an employee :- (tick as appropriate) a) b) c) d) To take reasonable care to carry on work that avoids unnecessary risks To provide a completely safe system of work where no accident can occur To employ staff without checks on their competence or their work history To ensure that only safe machinery plant and appliances are used on the work site Continued
Page 7

A.33: The national Occupational Health and Safety Strategy 2002-2012 had five priority industries targeted for improvement. Name three of these.

A.34: Safe Work Australia not only provides information and advice on safety and health in education but can take action against employers failing to provide safe systems of work. (circle one) a) b) True False

A.35: Which of the following is NOT an ingredient of a valid contract :- (circle one) a) b) c) d) Agreement Consideration Undue influence Certainty of terms

A.36: Which of the following could not be considered uncertainty in a contract? (circle as appropriate) a) b) c) If there are differing opinions as to which of two meanings is given to a clause If the language is so imprecise that one could not say what actions would satisfy it If the conditions of the contract left vital matters yet to be agreed

A.37: Which of the following is NOT one of the effects of frustration? (circle one) a) b) c) Discharge at date of frustrating events Accrued rights are not divested Renegotiation of contract

A.38: What is the statutory OHS 'duty of care' requirement for employers? a) b) c) d) Employers must offer insurance to their injured employees for any injury; Provide a nutritious lunch for employees; Provide a safe work place, safe plant/equipment, safe work systems and competent staff; Requires strategies to prevent injuries and illnesses occurring in the workplace; Continued
Page 8

A.39: Which of these are safety documents that you might find at a project workplace? a) b) c) d) Project Risk Register and Job Safety Analysis; Key stakeholders and financial endorsement body; Emergency phone numbers and local pizza take away numbers; List of resource committee members and managers responsibilities.

A.40: What purpose does 'safety compliance' achieve in an engineering/surveying project? a) b) c) d) Ensures that the premises, plant, substances or stands are safe and without risks to health so far as is reasonably practicable; Details policies, procedures and instructions for operation, maintenance and support roles; Ensures effective arrangements for the use, handling, storage and transport of all products and substances; Evidence of accident prevention approach for detecting deficiencies and provides a process for the resolution of OHS issues in project components which have an accident potential; All of the above:

e)

END OF PART A (START A NEW BOOK)

Continued
Page 9

PART B: Engineering Project Management (Answer in a SEPARATE BOOK) (40 marks) B.1 (10 Marks) a) Using a cumulative cost curve, identify Budgeted Cost of Work Scheduled, Actual Cost of Work Scheduled, Budget at Completion, Estimate at Completion and Variance at Completion. (2 marks) b) c) Describe the term project lifecycle and list the 4 typical phases of a project lifecycle. (1 mark) Provide a definition of a project and list two key features that distinguish projects from operations. (1 mark) d) What are the three prime objectives of project management and how do they relate to each other provide answer by way of diagram with each salient point labelled. (2 marks) e) f) Describe the term critical path. (1 mark) Projects always have stakeholders. What is a stakeholder? Provide 4 examples of project stakeholders. (1 mark) g) What does the project acronym WBS stand for and what are the 3 major components of a WBS. (2 marks)

Continued
Page 10

B.2 (10 Marks) a) List the: 5 processes involved in project time management; 4 processes involved in project risk management; 4 processes involved in project cost management; 3 processes involved in project quality management. (4 marks) b) A company wishes to purchase a new piece of equipment for a 4 year project, there are two options; the very imaginatively named machines A and B. Both machines cost $35K but have different performance expectations over the 4 years. Year 0 1 2 3 4 Total Income i. o o o ii. o o o A (cash flow) -$35K $15K $20K $20K $20K $75K B (cash flow) -$35K $5K $10K $20K $55K $90K

Pay Back: Utilising the pay back project selection model what project investment option would be selected. What are the advantages of this project selection model. What are the disadvantages of this project selection model. (2 marks) Return on Investment (ROI) Utilising the ROI project selection model what project investment option would be selected. What are the advantages of this project selection model. What are the disadvantages of this project selection model. (2marks)

c)

What is the major limitation of both of these project selection models. (2 marks)

Page 11

Continued B.3 (20 Marks) Problem Description: The project proposal is to construct a wind farm that has an annual energy output of 50GWh (giga watt hour). The capital costs for each component of the wind farm and their associated residual values are as follows: Capital Cost Land Roads Substation Transmission line Wind turbines Given: $1100K $150K $250K $2200K $20M Residual Value $2200K $0 $50K $500K $10M

The capital costs for each component are incurred at the commencement of the project year 0 of the project. The residual costs of the project assets are to be realised at the nominated rates at the end of the project end of year 7 The operations and maintenance costs for the wind farm are estimated at $50K per annum The energy the wind farm will produce is contracted to be sold at a rate of 10.0c / KWh (kilo watt hour). (1 mark) (4 marks)

a) b)

Calculate the gross annual revenue for each year of the project Calculate the net annual benefit for each year of the project.

The company uses a discount factor of 10% for its project investment decisions. Projects must satisfy two investment hurdles to proceed; NPV must be positive and IRR must be > 12%. Given Where NPV = -Ao + t=1 Ft / (1 + K)t Ao = Initial investment amount (outflow so ve) Ft = Net cash flow in period t K = Discount factor c) d) Calculate the NPV and the approximate IRR for the project, show all workings. (10 marks) Should the project proceed? Explain your answer. (5 marks) END OF PART B (START A NEW BOOK) Continued
Page 12

PART C: Engineering Economics (Answer in a SEPARATE BOOK) (20 Marks) C.1 Engineering projects of all types will compete with scarce capital funds in both the public and private sector. Describe, in short paragraph answers, as many methods as you are aware of that might be used to rank or sort projects from a financial perspective. (5 marks) C.2 Engineers will often have to understand terminology used in basic statements of account from companies and other entities. Explain in short paragraph answers your understanding of each of the following points: a) b) c) d) e) Profit and Loss statement Balance Sheet Cashflow statement Revenue and Expenses and which statement/s they appear on. Assets and Liabilities and which statement/s they appear on. (15 marks)

END OF PART C END OF EXAM

Page 13