To: Mr. Thomas Stearns, Project Manager, International Guidance and Controls
Date: October 2, 2012
RE: Software Project for CARV Command and Guidance System
I have recently received and reviewed your memorandum regarding your issue with the Confined Aquatic Recovery Vehicle project. I have considered three options and their ability to save your company as much money as possible while completing this project in a timely manner. The three alternatives I considered were to immediately invest in hardware, to stay on your current path with the software developments only or to wait and reevaluate your situation in five months. Each of these …show more content…
The costs associated with delaying the decision for five months gradually increase but are much lower than investing in hardware for the most part. The point at which the hardware option and delay option intersect is $1,805 (Attachment 3). So, delaying your decision and then reevaluating in five months seems to be the best alternative regarding reputation costs.
Based on the costs associated with each option and the reputation analysis, I believe your best solution is to continue your software developments and delay the hardware decision for five months. Delaying your decision with save you approximately $30,000 compared to immediately investing in hardware and $210,000 compared to solely investing in software (not taking into consideration the reputation costs). As long as reputation costs stay below $1,805, delaying shows to be the best option again. The benefits of implementing this solution are saving large sums of money and minimizing reputation costs in the event that the project is not completed on time. The risks associated with this solution include the possibility that you waste five months on developing software that turns out to be not up to par and waiting to develop hardware that could be immediately invested in. There is no certain way to predict if the software development will be favorable or unfavorable so basing the EMV on the estimated probabilities can be risky. Regarding reputation costs,