STEG340

Engineering Project Management

Chapter 9
Reducing Duration
Dr. Aliaa M. Abou-Ali
aabouali@[Link]
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Learning Objectives
• Understand the different reasons for crashing a project.
• Identify the different options for crashing an activity when resources are not constrained.

• Identify the different options for crashing an activity when resources are constrained.
• Determine the optimum cost-time point in a project network.
• Understand the risks associated with compressing or crashing a project.

• Identify different options for reducing the costs of a project.

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Chapter Outline
• Rationale for Reducing Project Duration
• Options for Accelerating Project Completion

• Project Cost-Duration Graph

• Constructing a Project Cost-Duration Graph
• Practical Considerations

• What If Cost, Not Time, Is the Issue?

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9.1 Rationale for Reducing Project Duration

Crash is a term that has emerged in the project management lexicon for shortening
the duration of an activity or a project beyond when it normally can be done.

Reasons for attempting to reduce the duration of a project are:

Time-to-market Unforeseen delays Incentive contracts Imposed deadlines Overhead costs Pressure to reassign
pressures (bonuses for early and contract resources to other
completion) commitments projects
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9.1 Rationale for Reducing Project Duration

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9.2 Options for Accelerating Project Completion

Resources Are Not Constrained Resources Are Constrained

Improve project team
Add resources
efficiency

Outsource project work Fast tracking

Use critical-chain
Schedule overtime
management

Establish a core project

Reduce project scope
team

Do it twice—fast and
Compromise quality
correctly
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9.3 Project Cost-Duration Graph

• Project Indirect Costs
- Are costs that cannot be associated with any particular work package or activity.
Examples are overhead costs such as supervision, administration, consultants, and interest.
- Are costs that vary directly with time.
• Project Direct Costs
- Are costs that assigned directly to a work package and activity.
Examples are labor, materials, equipment, subcontractors.
- Represent normal costs (low-cost, efficient methods for a normal time).
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9.4 Constructing a Project Cost-Duration Graph

The project cost-duration graph is used to compare additional cost alternatives for benefits.
• Three major steps are required to construct a project cost-duration graph:
1. Find total direct costs for selected project durations.
2. Find total indirect costs for selected project durations.
3. Sum direct and indirect costs for these selected durations.
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Determining the Activities to Shorten

Which activities to shorten?
Look for critical activities that can be shortened with the smallest increase in cost per unit of time.

Assumptions:
1. The cost-time relationship is linear.
2. Normal time assumes low-cost, efficient methods to complete the activity.
3. Crash time represents a limit—the greatest time reduction possible under realistic conditions.
4. Slope represents cost per unit of time.
5. All accelerations must occur within the normal and crash times.
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Activity Graph

Rise Crash cost − Normal cost $800 − $400

Cost slope = = = = $80 per unit of time
Run Normal time − Crash time 10 − 5
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Cost-Duration Trade-off – Example

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Cost-Duration Trade-off – Example

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Cost-Duration Trade-off – Example

• FIGURE 9.3 (Continued)
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Cost-Duration Trade-off – Example

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Cost-Duration Trade-off – Example

Summary Costs by Duration Project Cost-Duration Graph
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9.5 Practical Considerations

- Using the project cost-duration graph
- Crash times

- Linearity assumption
- Choice of activities to crash revisited
- Time reduction decisions and sensitivity
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9.6 What If Cost, Not Time, Is the Issue?

• Commonly used options for cutting costs are:
- Reduce project scope

- Have owner take on more responsibility

- Outsource project activities or even the entire project
- Brainstorm cost savings options
Summary
Project Crashing
Shortening (or expediting) some activities within a project to reduce overall project completion time
and total project costs

Project Costs The objective of cost analysis is to determine the

project schedule that minimizes total project costs.
• Direct Costs
• Indirect Costs
• Penalty Costs
𝑪𝑪 − 𝑵𝑪
𝑪𝒐𝒔𝒕 𝒕𝒐 𝒄𝒓𝒂𝒔𝒉 𝒑𝒆𝒓 𝒑𝒆𝒓𝒊𝒐𝒅 =
𝑵𝑻 − 𝑪𝑻
• Normal time (NT) is the time necessary to complete an activity under normal conditions.
• Normal cost (NC) is the activity cost associated with the normal time.
• Crash time (CT) is the shortest possible time to complete an activity.
• Crash cost (CC) is the activity cost associated with the crash time.
Summary
Determining the Minimum Cost Schedule:
1. Determine the project’s critical path(s).
2. Find the activity or activities on the critical path(s) with the lowest cost of crashing per
week.
3. Reduce the time for this activity until…
a. It cannot be further reduced or
b. Another path becomes critical, or
c. The increase in direct costs exceeds the indirect and penalty cost savings that result
from shortening the project.
4. Repeat this procedure until the increase in direct costs is larger than the savings
generated by shortening the project.
Example 2
DIRECT COST AND TIME DATA FOR THE ST. JOHN’S HOSPITAL PROJECT
Maximum
Cost of
Normal Time Normal Cost Crash Time Crash Cost Time
Activity Crashing per
(NT) (weeks) (NC)($) (CT)(weeks) (CC)($) Reduction
Week ($)
(week)
A 12 $12,000 11 $13,000
B 9 50,000 7 64,000
C 10 4,000 5 7,000
D 10 16,000 8 20,000
E 24 120,000 14 200,000
F 10 10,000 6 16,000
G 35 500,000 25 530,000
H 40 1,200,000 35 1,260,000
I 15 40,000 10 52,500
J 4 10,000 1 13,000
K 6 30,000 5 34,000
Totals $1,992,000 $2,209,500
Example 2
DIRECT COST AND TIME DATA FOR THE ST. JOHN’S HOSPITAL PROJECT
Maximum
Cost of
Normal Time Normal Cost Crash Time Crash Cost Time
Activity Crashing per
(NT) (weeks) (NC)($) (CT)(weeks) (CC)($) Reduction
Week ($)
(week)
A 12 $12,000 11 $13,000 1 1,000
B 9 50,000 7 64,000 2 7,000
C 10 4,000 5 7,000 5 600
D 10 16,000 8 20,000 2 2,000
E 24 120,000 14 200,000 10 8,000
F 10 10,000 6 16,000 4 1,500
G 35 500,000 25 530,000 10 3,000
H 40 1,200,000 35 1,260,000 5 12,000
I 15 40,000 10 52,500 5 2,500
J 4 10,000 1 13,000 3 1,000
K 6 30,000 5 34,000 1 4,000
Totals $1,992,000 $2,209,500
Example 2
Cost-Time Relationships
C 10 4,000 5 7,000 5 600

8000 —
Crash cost (CC)
7000 —
Direct cost (dollars) Linear cost assumption
6000 —
Estimated costs for a
5200 2-week reduction,
5000 — from 10 weeks to
8 weeks
4000 —

3000 — Normal cost (NC)

0— | | | | | |
Figure 7.5
5 6 7 8 9 10 11
(Crash time) (Normal time)
Time (weeks)
Example 2
The project indirect costs are $8,000 per week. After week 65, the Regional
Hospital Board imposes on St. John’s a penalty cost of $20,000 per week if the
hospital is not fully operational.
With a critical path completion time of 69 weeks, the hospital faces potentially
large penalty costs unless the schedule is changed. For every week that the
project is shortened—to week 65—the hospital saves one week of penalty and
indirect costs, or $28,000. For reductions beyond week 65, the savings are only
the weekly indirect costs of $8,000.
Determine the minimum-cost schedule for the St. John’s Hospital project.
Example 2
• Project completion time = 69 weeks. A–I–K 33 weeks
Direct = $1,992,000 A–F–K 28 weeks
A–C–G–J–K 67 weeks
Indirect = 69($8,000) = $552,000 B–D–H–J–K 69 weeks
Penalty = (69 – 65)($20,000) = $80,000 B–E–J–K 43 weeks
Total Project cost = Direct costs + Indirect costs + Penalty
= $1,992,000 + $552,000 + $80,000
= $2,624,000
Example 2
I
STAGE 1 15

A F K
12 10 6

C G
Start 10 35 Finish

B D H J
9 10 40 4

E
24
Example 2
STAGE 1
Step 1. The critical path is B–D–H–J–K.
Step 2. The cheapest activity to crash per week is J at $1,000, which is much less than the savings in
indirect and penalty costs of $28,000 per week.
Step 3. Crash activity J by its limit of three weeks because the critical path remains unchanged. The new
expected path times are
A–C–G–J–K: 64 weeks
B–D–H–J–K: 66 weeks

The net savings are 3($28,000) – 3($1,000) = $81,000.

The total project costs are now $2,624,000 – $81,000 = $2,543,000.

Example 2
I
STAGE 1 15

A F K
12 10 6

C G
Start 10 35 Finish

B D H J
9 10 40 1

E
24
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

4
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

4
Example 2
I
STAGE 2 15

A F K
12 10 6

C G
Start 10 35 Finish

B D H J
9 10 40 1

E
24
Example 2
STAGE 2
Step 1. The critical path is still B–D–H–J–K.
Step 2. The cheapest activity to crash per week is now D at $2,000.
Step 3. Crash D by two weeks.
• The first week of reduction in activity D saves $28,000 because it eliminates a week of penalty costs,
as well as indirect costs.
• Crashing D by a second week saves only $8,000 in indirect costs because, after week 65, no more
penalty costs are incurred.
• Updated path times are
A–C–G–J–K: 64 weeks and B–D–H–J–K: 64 weeks
• The net savings are $28,000 + $8,000 – 2($2,000) = $32,000.
• Total project costs are now $2,543,000 – $32,000 = $2,511,000.
Example 2
STAGE 2 I
15

A F K
12 10 6

C G
Start 10 35 Finish

B D H J
9 8 40 1

E
24
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

4
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

B-D-H-J-K
2 D 2 64 1,995.0 4.0 512.0 0.0 2,511.0
A-C-G-J-K

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Example 2
I
STAGE 3 15

A F K
12 10 6

C G
Start 10 35 Finish

B D H J
9 8 40 1

E
24
Example 2
STAGE 3
Step 1. The critical paths are B–D–H–J–K and A-C-G-J-K
Step 2. Activities eligible to be crashed:
• (A, B); (A, H); (C, B); (C, H); (G, B); (G, H)—or to crash Activity K
• We consider only those alternatives for which the costs of crashing are less than the potential savings
of $8,000 per week.
• We choose activity K to crash 1 week at $4,000 per week.
Step 3.
• Updated path times are: A–C–G–J–K: 63 weeks and B–D–H–J–K: 63 weeks
• Net savings are $8,000 – $4,000 = $4,000.
• Total project costs are $2,511,000 – $4,000 = $2,507,000.
Example 2
STAGE 3 I
15

A F K
12 10 5

C G
Start 10 35 Finish

B D H J
9 8 40 1

E
24
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

B-D-H-J-K
2 D 2 64 1,995.0 4.0 512.0 0.0 2,511.0
A-C-G-J-K

4
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

B-D-H-J-K
2 D 2 64 1,995.0 4.0 512.0 0.0 2,511.0
A-C-G-J-K

B-D-H-J-K
3 K 1 63 1,999.0 4.0 504.0 0.0 2,507.0
A-C-G-J-K

4
Example 2
I
STAGE 4 15

A F K
12 10 5

C G
Start 10 35 Finish

B D H J
9 8 40 1

E
24
Example 2
STAGE 4
Step 1. The critical paths are still B–D–H–J–K and A–C–G–J–K.
Step 2. Activities eligible to be crashed: (B,C) @ $7,600 per week.
Step 3. Crash activities B and C by two weeks.
• Updated path times are
• A–C–G–J–K: 61 weeks and B–D–H–J–K: 61 weeks
• The net savings are 2($8,000) – 2($7,600) = $800.
• Total project costs are now $2,507,000 – $800 = $2,506,200.
Example 2
I
STAGE 4 15

A F K
12 10 5

C G
Start 8 35 Finish

B D H J
7 8 40 1

E
24
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

B-D-H-J-K
2 D 2 64 1,995.0 4.0 512.0 0.0 2,511.0
A-C-G-J-K

B-D-H-J-K
3 K 1 63 1,999.0 4.0 504.0 0.0 2,507.0
A-C-G-J-K
Example 2
Project Crash Total Total
Time Resulting Project Direct Costs,
Crash Cost Indirect Penalty Total Project
Stage Reduction Critical Duration
Activity Last Trial Added Costs Costs Costs ($000)
(weeks) Path(s) (weeks)
($000) ($000) ($000) ($000)

0 — — B-D-H-J-K 69 1,992.0 — 552.0 80.0 2,624.0

1 J 3 B-D-H-J-K 66 1,992.0 3.0 528.0 20.0 2,543.0

B-D-H-J-K
2 D 2 64 1,995.0 4.0 512.0 0.0 2,511.0
A-C-G-J-K

B-D-H-J-K
3 K 1 63 1,999.0 4.0 504.0 0.0 2,507.0
A-C-G-J-K

B-D-H-J-K
4 B, C 2 61 2,003.0 15.2 488.0 0.0 2,506.2
A-C-G-J-K
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Thank you…