1. Strategic Project Management1SPM PERT/CPM Technical Issues - Part 2 PERT/CPM Technical Issues zPERT & CPM Technical Issues: yResource Loading & Leveling (Part 1) yCrashing the Network (Part 2) ySimulation (Part 3)

2. Strategic Project Management2SPM PERT/CPM Technical Issues - Part 2 Project Costs zThe cost aspect of a project can be included by determining the cost-duration relationship for each activity. yThis relationship usually includes only the direct costs associated with the activity xlabor and material yIndirect costs (overhead) are generally applied (charged) to the project as a whole on a per day (or per time unit) basis.

3. Strategic Project Management3SPM PERT/CPM Technical Issues - Part 2 Project Costs (continued) zIn many cases, the relationship between the direct cost and the duration for an activity is approximately linear. yA shorter activity duration usually costs more xboth per unit time and in total yThere is almost always a limit to how much the duration can be compressed yTaha Diagrams Page 5

4. Strategic Project Management4SPM PERT/CPM Technical Issues - Part 2 Crashing the Network zAfter defining the cost-time relationships, the activities are assigned their normal durations. zThe critical path is determined and the project cost is calculated. zNext, we consider reducing the duration of the project (crashing). yTaha Diagrams Page 6 and Page 7

5. Strategic Project Management5SPM PERT/CPM Technical Issues - Part 2 Crashing the Network (continued) zA project duration reduction can be effected ONLY if the critical path is reduced. yConsider the example on Taha Diagrams Pages 8 and 9 yWe will consider crashing only activities on the critical path yCrashing non-critical activities serves only to increase cost!

6. Strategic Project Management6SPM PERT/CPM Technical Issues - Part 2 Crashing the Network Methodology zOur goal is to achieve a time reduction at the least possible increase in cost. ySelect the critical path activity with the smallest cost-time slope xTaha Diagrams Page 10 yslope=(C crash - C normal ) / (D normal -D crash ) yIf this activity is at its crash time, consider the next smallest slope.

7. Strategic Project Management7SPM PERT/CPM Technical Issues - Part 2 Crashing the Network Methodology (continued) yIf all activities on a critical path are crashed to their limits, no further reduction is possible. yIf parallel critical paths (segments) exist, an activity on each path (segment) must be selected and the sum of the cost-time slopes for the activities must be considered. yCompress (crash) the selected activity(ies) by one time unit.

8. Strategic Project Management8SPM PERT/CPM Technical Issues - Part 2 Crashing the Network Methodology (continued) yRecalculate the critical path and project cost. yRepeat the this process until further crashing is not possible. zThe end result will be a set of time-cost data which can be plotted to show the time-cost relationship for the project. yTaha Diagrams Pages 11 through 14 yTaha Diagrams Page 15 summarizes

9. Strategic Project Management9SPM PERT/CPM Technical Issues - Part 2 Minimum Project Cost zThe last step is to add Indirect Costs to the analysis. yIndirect costs (overhead) generally increase as the project duration increases. yFrequently this will be a linearly (or nearly linear) relationship. zTotal project cost is the sum of the direct and indirect costs for a given duration.

10. Strategic Project Management10SPM PERT/CPM Technical Issues - Part 2 Minimum Project Cost (continued) zA graph of these costs allows you to easily spot the minimum and to visualize the nature of the relationship between time and cost. zThis was illustrated in Taha Diagrams Page 7