The Dulhasti power plant started as a 40 Million dollar project that ended up costing 750 Million dollars. So how did this happen you ask? Do you think it was the estimating team that botched it up? Or was it the Indian government that didn’t give the bidders all of the facts and details of where they wanted this plant built? In the case of the Dulhasti Power plant I believe it was some of both. The plant was to be constructed in a remote working location that was also the site of a border dispute.The original contractor underbid the project intentionally probably in hopes of getting more work in the future. They also ran into unforeseen costs when they had to have 24 hour security to prevent sabotage to the site. All of these issues coupled together with other problems that arose throughout the duration made for a long and costly project.
| Each project includes its own unique challenges. It is up to the project manager to uncover as many of those challenges as possible before the estimate is presented, in order to provide the most accurate bid possible.In this situation I believe the project estimating team fell short or just overlooked problems in order to have a competitive edge over the other bidders. (Pinto, 2010) On the other hand I also believe that the Indian government didn’t give all of the bidders an all access pass to the site of interest because they wanted the project done for as little as possible with the contractor having to shoulder all of the risks.
(Bureau, 2005) So what do we do to be successful here? First let’s assess the overall area.We will be working in the mountains in a remote area, not even close to a major city. Accurate cost estimation when working in harsh geographical locations could include; temperature, specialty equipment needed, site accessibility, labor availability and the necessary infrastructure required for the project. In this instance also the need for security and the variable costs associated due to the harsh conditions of the Himalayas.
Appropriate time lines and phases for the project would need to be addressed before acceptance of the project.The advantages of the Indian government requiring a fixed price quote as I stated earlier leaves the project organization accepting all of the risk. The disadvantages of the fixed contract included: Overruns in money and project duration. (Bureau, 2005) . A definitive budget is expected early in the projects life cycle, however complete access and objectives must be understood. Realistic appraisals can only be determined after thorough investigation.
Under and over bids often stem from lack of information.Underbids in this situation most likely stem from time lines required, lack of geographical understanding, high profile account, and limited access. (Lowe, 2012) The French consortium that initially won the bid for 50 million dollars immediately changed their price to include some of the challenges included in the project after the fact. These immediate cost escalations followed by excessive timelines are due in part to miscommunication, greed and limited access.Being up front and honest with the Indian government as to what is required to meet their expectations within their particular budget and time lines would be my approach to the project.
In this situation both parties would have to have a clear understanding of each other’s expectations. Having a clear communication planned laid out so everyone stays up to date on what is going on would be another asset. While the Indian government only desired there project to be completed on time they may not have had a clear understanding of the intricacies involved to accomplish this.
