Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 1 Reasons to Reduce Project Durations: 1.To realize incentive pay 2.To fit.

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Presentation transcript:

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 1 Reasons to Reduce Project Durations: 1.To realize incentive pay 2.To fit within the contractually required time (influences Bid price). 3.To avoid paying Liquated Damages/Damage for delay causes (or avoid damaging the company’s relationship). 4.To complete a project early & move on to another project (Although the Job-specify profit may reduce, company profile may increase). 5.To complete a project when weather conditions make it less expensive (Avoid temporary Heating, avoid completing site work during raining season).

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 2 Methods to reduce durations: 1.Have the existing crew work overtime. This increase the labor costs due to increase pay rate and decrease productivity. 2.Bring in additional workers to enlarge crew size. This increases labor costs due to overcrowding and poor learning curve. 3.Use better/more advanced equipment. This will usually increase costs due to rental and transport fees. If labor costs (per unit) are reduced, this could reduce costs. 4.Add subcontracted labor to the activity. This almost always increases the cost of an activity unless the subcontracted labor is for more efficient.

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 3 Project Costs Definitions

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 4 Practices to Estimate the Project cost Some company assigns Overhead office as % of direct cost. Most companies don’t consider profit as a cost of the job. Instead, analysis are completed by using Direct costs + Indirect costs + Company overhead vs. Budgeted (estimated costs). Similar to each activity, the project as a whole has an ideal (Lease expensive) Duration.

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 5

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 6 Accelerating the Critical and Noncritical path

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 7 Determine Normal project duration, and cost. Identify Normal duration Critical Path. For large network, using CRITICALITY THEORM to eliminate the noncritical paths that do not need to be crashed. Compute the cost slop : Network Compression Algorithm

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 8 shortening the CRITICAL ACTIVITIES beginning with the activity having the lowest cost-slope Determine the compression limit (Nil) Network Compression Algorithm

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 9 Organize the data as in the following table: Update the project network Network Compression Algorithm

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 10 When a new Critical path is formed: –Shorten the combination of activity which Falls on Both Critical Paths, OR –Shorten one activity from each of the critical paths. Use the combined cost of shortening both activities when determining if it is cost effective to shorten the project. At each shortening cycle, compute the new project duration and project cost Network Compression Algorithm

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 11 Continue until no further shortening is possible Tabulate and Plot the Indirect project Cost on the same time-cost graph Network Compression Algorithm

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 12 Add direct and indirect cost to find the project cost at each duration. Use the total project cost-time curve to find the optimum time. Network Compression Algorithm

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Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 20 Project Optimal Duration

Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 21