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Topic History of : free Float

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4 years 10 months ago #5129

Mohd Salik

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dear Steve,
I appreciate your answering my question. but where have you used 100,000/- of target contractor fees.

4 years 10 months ago #5117

Steve Sandoval

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Hello Mohd,

The formula for the Point of Total Assumption is:
PTA = ( (Ceiling Price - Target Price) / (Buyer's Share Ratio) ) + Target Cost

PTA is the expense level after which the seller pays 100% of contract costs. We can construct this logically:
1. You start with the target cost
2. For anything above the target cost but below the price ceiling, the buyer only pays their share ratio. To find out what contract expense this translates to, you *divide* by that share ratio.
3. You then add #1 (target cost) and #2 (the amount of additional spending required for the buyer to hit their ceiling price)

So in this case,
PTA = (1,200,000 - 1,000,000)/0.20 + 1000000
PTA = 2,000,000

However, in your question you stated a "cost benefit sharing ratio". The way this is worded it is not entirely clear which ratio is the seller's and which is the buyer's. In this case, I have assumed that the buyer's share ratio is 20%.
4 years 10 months ago #5114

Mohd Salik

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Could you plz help me solve this problem.

In a project a cost incentive contract has been awarded to a contractor with the following parameters.
Target Cost : 1,000,000

target contractor Fees : 100,000

Cost benefit sharing ratio : 80%/20%

Price Ceiling 1,200,000

What is the PTA of the project.
4 years 10 months ago #5102

Rahul Kakkar

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Mohd Salik wrote: Thanks Rahul,
For clearing my doubt on free float.


You're most welcome. Feel free to ask any further queries that you may have.
4 years 10 months ago #5099

Mohd Salik

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Thanks Rahul,
For clearing my doubt on free float.

4 years 10 months ago #5098

Craig Arcuri

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Simon Ngembu wrote: Is there any link between the concept of float and feeding buffers?

The concept of Float is a term used in the Critical Path Method. I've worked in Matrix organizations and it becomes complicated when you do not have all team members dedicated 100% to your project.

In this situation, Critical Chain Method may be more useful. It is the Critical Chain Method which utilizes Feeding Buffers instead of the concept of float. The Feeding Buffers are on the non-critical chain to help insure that delays on the non-critical chain do not affect the critical chain.

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