V04 Q37

Corporate Financial Officer: The proposal for our firm’s new office building is unnecessarily extravagant, overly spacious, and ridiculously expensive. The absolute maximum budget for this project is $9 million.

Building Contractor: Our architects have redrawn the blueprints to remove the atrium and sculpture garden, and our landscape artists have reduced the complexity of the surrounding gardens. We will now be able to complete the project at one-tenth the original estimated cost.

Which of the following, if true, most undermines the soundness of the contractor’s proposal to complete the project at a fraction of the original cost?

A The original estimated cost of the project was $100 million.
B The contracting firm was originally hired based on the originality of its atrium design.
C Corporate officers have already paid a deposit of $2 million.
D The firm expects to hire 100 new employees by the time the building project is completed.
E Architects working on the revised plans did not discard all expensive elements.

Situation:A building contractor offers revised blueprints to a client who claims the original plans were too expensive.

Reasoning:Which is the most serious flaw in the contractor’s proposal? The main concern of the financial officer is that the plans are larger, and therefore more expensive, than his firm can afford. Because the financial officer sets the maximum budget at $9 million, any evidence that the contractor’s new plans will be more expensive than this figure will greatly undermine the soundness of his proposal.

1. If the original cost of the project was $100 million, then one-tenth of this cost will be $10 million, which is $1 million more than the company can afford.
2. The elimination of the atrium does not undermine the soundness of the contractor’s plan, no matter if that design was originally appealing to the corporate officers.
3. The amount of the deposit has no bearing on the final total cost.
4. This option is tempting because it makes it seem as if the firm will need a larger building, but it actually has no bearing on the soundness of the contractor’s plan.
5. The corporate officer did not ask that all expensive elements be discarded, but only that the project cost no more than $9 million.

The correct answer is A.

___________________

This answer is incorrect. The question states "Which of the following, if true, most undermines the soundness of the contractor’s proposal to complete the project at a fraction of the original cost?"

Just because the revised project will cost more than the CFO can afford, it doesn't affect the contractor's proposal to complete the project at a fraction of the original cost.

ie. If the project cost $1 billion, and then the contractor came back with $100 million, it is still sufficiently larger than the CFO's budget, but would still be a fraction of the original cost.