SCENARIO
Instructor note: naturally you can change the geographic detail to fit your location better. In some parts, this write-up is deliberately written less than elegantly, to encourage students to come up with their own wording. Feel free to eliminate some of the unnecessary detail. It’s not there to confuse students, merely to test their content selection skills. However, it does take some time to sift through.
You are managing a project in a remote location in Northern BC, near the border with Alaska. The nearest town is Stewart approximately 170 km away. This future mine site is only accessible via a road that has been hacked, hairpin style, into the mountainside, specifically for the mine.
The mine has received environmental approval and your employer, Well-built Contracting, has landed the job of building the base camp that another company, which will build the mine facilities, will use. This base camp will consist of a series of prefabricated living quarters for which you are building foundations. You will also build some equipment sheds, a couple of materials storage areas, build a cafeteria and social area, and so on.
Equally important are a diesel electrical generating facility for the camp and services such as electricity and water and sewage.
It’s not a big project, but a difficult one logistically. Supplies have to be ordered well in advance and delivered great distances over rugged terrain. The crews are housed in very basic facilities and don’t like the isolation. The high winds and dry air chap lips and crack skin on your workers’ hands. The thin air at this altitude tires them out and gives some headaches. This is known as altitude sickness. Still, you’re on schedule. You keep a meticulous site-monitoring log, write weekly progress reports for your boss, and have just finished writing the first monthly progress report to the client, indicating that the project should be done by deadline. Part of your report was an itemized expense account.
And there lies the problem.
You have noticed that your fuel bills are much higher than you expected. The cost per litre of diesel fuel is quite high, largely because of the delivery cost. Instead of the usual cost of around $1.40/L in Prince Rupert (615 km from the mine), you are paying a rate that varies between $2.50 and $2.75, a little higher than you thought it would be, but not by much. The reason for the high cost per litre is that few suppliers are willing to make the drive up the mountain and those that are make you pay a premium for the extra driver time, fuel costs, and the wear and tear on the vehicles. This cost is beyond your control.
However, there is another reason for the high fuel bill. The diesel gensets’ are using far more fuel than you had anticipated. You ordered them from Apex Frontier Power Inc. based in Prince Rupert. They specialize in renting and leasing gensets. Much of their business is for the resource industry; they have a branch in Fort McMurray that provides gensets for gas and oil wells in the oil patch in Northern Alberta.
Your contact at Apex is Jay Sanghera. When you were planning and estimating the project, you told him how much power you would need for the site. He asked some specific questions, such as what the power would be used for and what hours the gensets would be running and for what purpose. For instance, you have to run a lot of tools and pumps over the day, but during the early morning, the evening, and overnight, you run mostly lights, computers, entertainment units, and kitchen equipment. In the dark of night, all that is running are the lights so people can make their way to the washrooms without injuring themselves.
Jay made a number of useful, money-saving suggestions that inspired confidence. As a result, you got two gensets. One, the Coollins DX5, runs the tools, pumps, and so on during the day when power demand is greatest. The other, the Coollins DX2, runs in the low demand times, the idea be- ing that you don’t want to run an overpowered unit for too little demand.
The consumption ratings that Jay provided for the gensets are 25-30 L/hr for the larger genset and 6-7.5 L/hr for the smaller. The bigger one runs roughly from 0700 until 1900. The smaller one runs roughly from 1630 (when the kitchen starts to prepare dinner; it’s on a different hook-up than the big genset) until 0800 (when breakfast is over and has been cleaned up). It runs again for lunch and clean-up from 1100 to 1330. prep
Your fuel expenses for the big genset to run 12 hours per day at approximately 30 L/hr should be about $900/day. The small genset runs for 18 hours per day at what should be 7 L/hr for a cost of about $315/day.
However, you are spending about $1,700/day on diesel for the gensets-way more than you ex- pected. This is a significant difference. What could be going on? You talk to Karen Ng, an appren- ticing diesel mechanic who maintains the gensets and other diesel equipment on site, to verify the hours that the gensets are actually running. According to her run-time logs, your hours are accurate. So it can’t be the hours of operation that are costing so much extra.
You use your satellite hookup to search the Apex website page for genset specs. They link you to the manufacturer’s website where you find Jay’s estimated fuel consumption matches the specs. What could be going on? I specs for fuel consumption. When you check, you find that
Then you see it. In the column header for average fuel consumption under full load is an asterisk. When you look at the footnote underneath the fuel consumption table, you read “Fuel consumption ratings calculated at 1 standard atmosphere.” What this means is that the fuel consumption ratings that Jay quoted are calculated to be accurate at sea level, where the air entering the intake is at 1 standard atmosphere of pressure. However, you are operating at 4,356 m altitude, as Jay is aware. The air is much thinner and the gensets struggle to get enough air and have to work in much harder and are therefore using a lot more fuel.
You did a little more research and find that it is normal in circumstances like this adapt the air intake and fuel injection systems for altitude.
You decide that Jay should have anticipated this problem and that he should provide you with new gensets with suitable air intake and fuel injection systems. And you want this done for free, though the cost to Apex will be substantial.
Question
In the four weeks you’ve been in operation, you have incurred an additional daily fuel cost because of Jay’s error. Decide what sort of financial compensation to ask for, but ask for some. You could ask for full reimbursement or for free rental from the start of the project until the new equipment arrives. In other words, you could decline to pay to rent the wrong equipment.
You decide to send Jay an email right away.
