Construction Planning And Control
Project Time - Cost Trade - Off
Samantha Manawadu
Time-Cost Trade-Offs
Activity time estimates are made for
some given level of resources
To reduce both construction projects “
time and Cost “ is critical in today’s
market driven economy
This relationship between construction
projects is called time – cost trade – off
decisions.
2
Time-Cost Trade-Offs
Objective of the time – cost trade-off analysis
is to reduce the original project duration,
determined from the critical path analysis, to
meet specific deadline, with the least cost.
Time-Cost Trade-Offs
Reasons for imposed project duration dates :
Finish the project in a predefined deadline date.
Recover early delays.
Unforeseen delays
Incentive contracts (bonuses for early completion)
Imposed deadlines and contract commitments
Avoid liquidated damages.
Free key resources early for other projects
Avoid adverse weather conditions that might affect
productivity.
Receive an early completion-bonus.
Improve project cash flow
Time-Cost Trade-Offs
Reducing project duration can be done by adjusting
overlaps between activities or by reducing activities’
duration.
The activity duration can be reduced by one of the
following actions:
Applying multiple-shifts work.
Working extended hours (over time).
Offering incentive payments to increase the
productivity. Working on week ends and holidays.
Using additional resources.
Using materials with faster installation methods.
Using alternate construction methods or sequence.
ResourcesNot Resources
Constrained Constrained
Adding resources Fast-tracking
Outsourcing project Critical-chain
work Reducing project scope
Scheduling overtime Compromise quality
Establishing a core
project team
Do it twice—fast and
then correctly
Time-Cost Trade-Offs - Crashing
Crashing
Project crashing is a method for shortening
project duration by reducing one or more
critical activities to a time less than normal
activity time
The project duration may be shortened by
increasing direct expenses, thereby realizing
savings in indirect project costs.
7
Project Indirect Costs
Costs that cannot be associated with any
particular work package or project activity.
Supervision, administration, consultants, and interest
Costs that vary (increase) with time.
Reducing project time directly reduces indirect costs.
Project Direct Costs
Normal costs that can be assigned directly to
a specific work package or project activity.
Labor, materials, equipment, and subcontractors
Crashing activities increases direct costs.
9–8
Identifying direct costs to reduce project time
Gather information about direct and indirect
costs of specific project durations.
Search critical activities for lowest direct-cost
activities to shorten project duration.
Compute total costs for specific durations and
compare to benefits of reducing project time.
9–9
Find
total direct costs for selected project
durations.
Find
total indirect costs for selected project
durations.
Sum direct and indirect costs for these elected
project durations.
Compare additional cost alternatives for
benefits.
Determining Activities to Shorten
Shorten the activities with the smallest
increase in cost per unit of time.
Assumptions:
The cost relationship is linear.
Normal time assumes low-cost, efficient
methods to complete the activity.
Crash time represents a limit—the greatest time
reduction possible under realistic conditions.
Slope represents a constant cost per unit of time.
All accelerations must occur within the normal
and crash times.
crash cost – normal cost
Cost slope =
normal duration – crash duration
Tomake decisions concerning crashing
requires information about:
Time:
Regular time and crash time estimates for each
activity
Cost:
Regular cost and crash cost estimates for each activity
A list of activities that are on the critical path
Critical path activities are potential candidates for
crashing
Crashing non-critical path activities would not have an
impact on overall project duration
MIS 373: Basic Operations Management 15
General procedure:
1. Crash the project one period at a time
2. Crash only activities on the critical path/s
3. Crash the least expensive activity (that is on
the critical path)
4. When there are multiple critical paths, find
the sum of crashing the least expensive
activity on each critical path
If two or more critical paths share common
activities, compare the least expensive cost of
crashing a common activity shared by critical paths
with the sum for the separate critical paths
MIS 373: Basic Operations Management 16
Indirect costs: $1,000 / day 2
(that is, the entire project saves f
$1000 if it finishes one day earlier,
$2000 if it finishes two day earlier, 4
and so on.) d
Activity Normal Crash (min) Available time Cost to Crash
time time (crash-normal) [$/day]
[days] [days] [days]
a 6 6 - -
b 10 8 2 500
c 5 4 1 300
d 4 1 3 700
e 9 7 2 600
f 2 1 1 800
2
1. Determine Critical Path f
Path Length
4
a-b-f 18
d
c-d-e-f 20 (critical path)
Activity Normal Crash Available Cost to
2. Rank activities on CP in time (min) time Crash
[days] time (crash- [$/day]
order of lowest crashing cost [days] normal)
[days]
a 6 6 - -
Activity Cost per day to crash Available days
b 10 8 2 500
c 300 1
c 5 4 1 300
e 600 2
d 700 3 d 4 1 3 700
f 800 1 e 9 7 2 600
f 2 1 1 800
Crash activity c by 1 day: 2. Rank activities on CP in
cost $300 < $1,000 (CP=19 order of lowest crashing cost
days)
(cannot crash c anymore) Activity Cost per day to crash Available days
c 300 1
e 600 2
d 700 3
f 800 1
2
f
4
4
d
Crash activity e by 1 day: 2. Rank activities on CP in
cost $600 < $1,000 (CP=18 order of lowest crashing
days) cost
(may crash activity e by 1 more day)
Activity Cost per day to crash
Available days
c 300 1
e 600 2
d 700 3
f 800 1
2
f
4
• Both paths are now critical.
• Have to crash both in order to
4
shorten project.
d
Both paths are now critical. 2
Have to crash both in order to f
shorten project.
4
Remaining activities d
Path Activity Cost per day to crash Available days
a-b-f a - -
b 500 2
f 800 1
c-d-e-f c - -
e 600 1
d 700 3
f 800 1
Crash activity f (is on both paths) by 1 day:
cost = $800 < $1,000 (CP=17 days)
Remaining activities
Crash activity f (is on Path Activity Cost per day to crash
both paths) by 1 day: Available days
a-b-f a - -
cost $800 < $1,000 b 500 2
(CP=17 days) f 800 1
c-d-e-f c - -
e 600 1
d 700 3
f 800 1
2 1
f
4
d
Both paths are still critical. 1
Have to crash both in order to f
shorten project.
4
Remaining activities d
Path Activity Cost per day to crash Available days
a-b-f a - -
b 500 2
f - -
c-d-e-f c - -
e 600 1
d 700 3
f - -
Crash activity b by 1 day: cost $500 AND
Crash activity e by 1 day: cost $600
Total cost: $1,100>$1,000 (indirect costs) =>DONE!
Length after crashing
Path\crash n=0 1 2 3
a-b-f 18 18 18 17
c-d-e-f 20 19 18 17
Activity Crashed c e f
Cost 0 ($300) ($600) ($800)
Savings 0 $1,000 $1,000 $1,000
Total 0 $700 +$400 +$200 = $1,300
EXERCISE PROBLEMS
• Costs for a project are $12,000 per week for as long as the
project lasts. The project manager has supplied the cost and
time information shown. Use the information to
a) Determine an optimum crashing plan.
b) Summarize the total costs for the plan.
EXERCISE SOLUTIONS
a) Determine an optimum crashing plan.
Step 1: Compute path lengths and identify the critical path:
Step 2: Rank critical activities according to crash costs:
Activity b should be shortened one week since it has the lower
crashing cost. This would reduce indirect costs by $12,000 at a cost
of $3,000, for a net savings of $9,000.
13
2
EXERCISE SOLUTIONS
a) Determine an optimum crashing plan.
Step 3: Rank activities by crashing costs on the two critical paths:
At this point, paths a-b and e-f would both have a length of 23
weeks, so both would be critical.
Choose one activity (the least costly) on each path to crash: b
on a-b and f on e-f, for a total cost of $4,000 + $2,000 = $6,000
and a net savings of $12,000 − $6,000 = $6,000.
13 12
2 1
7
0
SOLUTIONS
a) Determine an optimum crashing plan.
Step 4: Check to see which path(s) might be critical:
a-b and e-f would be 22 weeks in length, and c-d would still be 19 weeks.
Step 5: Rank activities on the critical paths:
Crash b on path a-b and e on e-f for a cost of $4,000 + $6,000
= $10,000, for a net savings of $12,000 − $10,000 = $2,000.
13 12 11
2 1 0
14
2 7
0
SOLUTIONS
a) Determine an optimum crashing plan.
Step 6: Check to see which path(s) might be critical:
Paths a-b and e-f would be 21 weeks in length, and c-d would still be 19 weeks.
Step 7: At this point, no further improvement is possible:
Paths a-b and e-f would be 21 weeks in length, and one activity from each path
would have to be shortened. This would mean activity a at $11,000 and e at $6,000
for a total of $17,000, which exceeds the $12,000 potential savings in costs.
13 12 11
2 1 0
14
2 7
0
EXERCISE SOLUTIONS
b) Summarize the total costs for the plan.
The following table summarizes the results, showing the length of the
project after crashing n weeks:
A summary of costs for the preceding schedule would look like this:
* Total Cost = Cumulative Crashing Cost + Indirect Cost
No crash
Crash: b
Crash: b, f
Crash: b, e
Projects are unique, limited duration sets of tasks
designed to accomplish a set of objectives.
The key project metrics are cost, time, and
performance.
The project manager and the project team can be
major factors in achieving project goals.
Work breakdown structures, Gantt charts, and network
diagrams are useful tools for managing projects.
We may consider crashing activities to optimize the
time-cost trade-offs: increase direct cost but decrease
indirect cost as a result of shorter project time.
31