1. Chapter 9: Reducing Project Duration
Rationale
Time Is Money: Cost-Time Tradeoffs
Reducing the time of a critical activity usually incurs additional direct costs.
Cost-time solutions focus on reducing (crashing) activities on the critical path to shorten overall duration of the project.
Reasons for imposed project duration dates:
Customer requirements and contract commitments
Time-to-market pressures
Incentive contracts (bonuses for early completion)
Unforeseen delays
Overhead and goodwill costs
Pressure to move resources to other projects
ISE Ch. 9 notes

2. Options for accelerating project completion
Adding resources
Outsourcing project work
Scheduling overtime
Establishing a core project team
Do it twice - fast and correctly
Fast-tracking
Critical-chain
Reducing project scope
Compromise quality
ISE Ch. 9 notes

3. Explanation of project costs
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.
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
ISE Ch. 9 notes

4. Reducing project duration to reduce project cost
Identifying direct costs to reduce project time
Compute total costs for specific durations and compare to benefits of reducing project time.
Search critical activities for lowest direct-cost activities to shorten project duration.
Gather information about direct and indirect costs of specific project durations.
ISE Ch. 9 notes

5. Project cost-duration graph
FIGURE 9.1
ISE Ch. 9 notes

6. Constructing a project cost-duration graph
Find total direct costs for selected project durations.
Find total indirect costs for selected project durations.
Sum direct and indirect costs for these selected project durations.
Compare additional cost alternatives for benefits.
ISE Ch. 9 notes

7. Constructing a project cost-duration graph
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.
ISE Ch. 9 notes

8. Activity graph cost slope = rise/run
= (crash cost – normal cost)/(normal time – crash time)
= (800 – 400)/(10 – 5)
= $80 per unit time
FIGURE 9.2
ISE Ch. 9 notes

9. Cost-duration trade-off example
Step 1: look for lowest crash cost per unit activity that can be crashed (here, activity A)
NOTE: In general, start with activities on the critical path (why?)
FIGURE 9.3
ISE Ch. 9 notes

10. Cost-duration trade-off example (cont’d)
Step 2: Reduce the time of the lowest crash cost per unit activity as much as you can -> recalculate time and cost
Step 3: repeat with the next lowest … (here, activity D)
FIGURE 9.3 (cont’d)
ISE Ch. 9 notes

11. Cost-duration trade-off example (cont’d)
If we reduce D by 1, note that the critical path now includes C … if we want to reduce C or D further, we would need to reduce both to shorten the overall time … therefore, move on to F.
FIGURE 9.4
ISE Ch. 9 notes

12. Cost-duration trade-off example (cont’d)
F can only reduce one day, increasing the cost by $30. Look what’s happened to the critical path now … checking the cost structure (go back), we must reduce E, C, and D simultaneously to get any more improvement in time.
FIGURE 9.4 (cont’d)
ISE Ch. 9 notes

13. Cost-duration trade-off example (cont’d)
Note: we have now exhausted all possible ways of crashing the project – A-C-F are all at their minimum time.
So, the minimum time to complete the project is 21 for a total cost of $610 (up from $450). Now we include indirect cost reductions and see what our optimal completion time is.
FIGURE 9.4 (cont’d)
ISE Ch. 9 notes

14. Summary costs by duration
Note we assume a savings of $50/day in indirect cost, so our lowest cost project duration is 22 days at a cost of $775.
FIGURE 9.5
ISE Ch. 9 notes

15. Project cost-duration graph
FIGURE 9.6
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16. Practical considerations
Using the project cost - duration graph
Crash times
Linearity assumption
Choice of activities to crash revisited
Time reduction decisions and sensitivity
Using the project cost - duration graph – valuable for evaluating proposed changes, keeps indirect costs visible, best if created during project planning without an imposed duration.
Crash times – requires some interpretation, level of trust to gather realistic crash times
Linearity assumption – ok for “quick and dirty” comparisons, but may not always apply
Choice of activities to crash revisited – be aware of inherent risks, effects of timing (early crashing may be wasted if later activities can’t be), effect on morale of asking some members of the team to work faster, etc.
Time reduction decisions and sensitivity – the more critical paths you create, the more sensitive the project will be
ISE Ch. 9 notes

17. What if cost, not time is the issue?
Commonly used options for cutting costs
Reduce project scope
Have owner take on more responsibility
Outsourcing project activities or even the entire project
Brainstorming cost savings options
ISE Ch. 9 notes