PROJECT COST OVERRUN ANALYSIS CASE STUDY: A ROTATING EQUIPMENT SERVICES COMPANY (PT Z)

• Main Author: Hanipa, Hepy
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/57409
• Institution: Institut Teknologi Bandung

PT Z is a multinational company based in one of the cities in West Java dealing with rotating equipment services. The company has a profitability issue due to the cost overrun of the projects they executed. The total cost overrun in 2020 is about 21.6 billion Rupiahs that was contributed from 3 (three) business units; BU1, BU2, and BU3. The biggest contributor is coming from BU1 that contributes 12 billion Rupiahs cost overrun due to overbudget on manhours. The company has been trying to reduce or minimize this cost overrun issue, however, the actions taken might not effective enough to address it. This study discusses what factors that cause the cost overrun at the company, investigation of the root cause(s), the alternative solutions that may be applicable, and the implementation of the selected alternative solutions. The root cause analysis used the current reality tree (CRT) and found 3 main root causes that cause the cost overrun. Those are project management implementation, project cost estimation review, and management of the tools for service activities. The alternative solutions of each root cause were established, and then the best alternative solutions were selected using the analytic hierarchy process (AHP). The biggest criteria for the selection of the alternative is the time, how immediate the solution can provide the impact to the cost overrun reduction. The selected alternative solutions are improvement on project management implementation, project cost estimation review process, and better management of the tools for service activities as part of implementation of total productive maintenance (TPM). Selected alternative solutions have been initiated by the company such as the internal initiative to improve project management implementation by involving the internal expert in organization, hiring dedicated people to manage the shop tools, and make some changes in cost estimation review process flow. Even though the result of implementation may not be measured and obtained in short period, the improvement to have at least 18% cost overrun reduction can be gained in following year (2021).