2.  Delay in project implementation invariably results in cost- overrun.  Delayed project implementation means delay in getting return on investments made. 2

3.  Additional resources required  Resources cost more  Any activity two time estimates are made ◦ Normal time ◦ Crash time 3

4.  In many projects the estimated project duration may exceed the target duration hence critical path is reduced so as to complete the project by target date Requirement of ◦ More workers ◦ Better equipments ◦ Overtime These involve direct costs (cost of material, labor, equipment). Reduces with time and indirect costs (overhead costs associated with the project administrative costs, insurance charges, depreciation, insurance and maintenance. Increases with time 4

5.  Project managers may have the option or requirement to crash the project, or accelerate the completion of the project.  This is accomplished by reducing the length of the critical path's).  The length of the critical path is reduced by reducing the duration of the activities on the critical path.  Process of shortening a project by using extra resources  Project should be shortened up to When savings in indirect costs = cost of additional resources 5

6.  Crashing ◦ reducing project time by expending additional resources  Crash time ◦ an amount of time an activity is reduced  Crash cost ◦ cost of reducing activity time  Goal ◦ reduce project duration at minimum cost 6

7. 7 Activity cost Activity time Crashing activity Crash time Crash cost Normal Activity Normal time Normal cost Slope = crash cost per unit time A B

8.  If each activity requires the expenditure of an amount of money to reduce its duration by one unit of time, then the project manager selects the least cost critical activity, reduces it by one time unit, and traces that change through the remainder of the network.  As a result of a reduction in an activity’s time, a new critical path may be created.  When there is more than one critical path, each of the critical paths must be reduced.  If the length of the project needs to be reduced further, the process is repeated. 8

9.  Direct costs is the cost of materials, equipment and direct labor (payroll, overtime, hiring and firing costs) required in performing an activity  Indirect costs incurred include costs of facilities, equipment, machinery, interest on investment, utilities, labor and personal costs, late completion penalties 9

10.  Time-cost trade – off  Resource levelling  Resource allocation 10

11. 11  Crashing costs increase as project duration decreases  Indirect costs increase as project duration increases  Reduce project length as long as crashing costs are less than indirect costs Time-Cost Tradeoff cost time Direct cost Indirect cost Total project cost Min total cost = optimal project time

12. 12

13. 13 ActivityNormal time Normal cost Rs Crash time Crash cost Rs Allowable crash time slope 1-2 1-3 2-4 2-5 3-4 4-6 5-6 6-7 6453684364536843 600 500 450 900 800 400 450 4231442242314422 1000 2000 1500 650 2000 3000 1000 800 2222242122222421 200 700 500 100 550 300 350 Time Cost data

14.  Draw an arrow diagram  Determine the project duration which will result in minimum total direct cost  If indirect costs are Rs. 4000 per day then determine the optimum duration of the project  (q4-2008) 14 ActivityImmediate Predecessor Normal Time(days) Crash Time(Days) Normal Cost Crash Cost (Rs.) P-8660009000 Q-1281500025000 R-4230006000 SP1061500025000 TR4410000 UP14101150017500 VS,Q,T841000024000

15.  Draw the network and find the critical path and normal project duration  What is minimum length of the project and corresponding costs when all the critical activities are crashed to the maximum extent  If indirect costs is Rs 6000 per day then what is the project – cost trade off point of the project  Q4-2007 15 ActivityNormal Time (Days) Crash Time (Days) Normal Cost(Rs) Crash Cost (Rs) A 1-232800010000 B 1-33240007000 C 2-5114000 D 2-6644000060000 E 3-42140006400 Dummy 4-5---- F 4-6533000038000 G 5-6762400030000 H 6-7433200039000

16.  The following table provides normal and crash times as well as normal and crash costs for the activities of a project. (2006) 16 ActivityNormal Time (weeks) Normal cost (Lakhs) Crash Time (Weeks) Crash Cost (Lakhs) 1-23519 2-348314 2-43426 2-58576 3-64325 4-66243 5-7510414 6-737110

17. 17 Activity Normal Time (Days) Normal Cost (Rs) Crash Time (Days) Crash Cost (Rs) 1-2660041000 1-3460022000 2-4550031500 2-534501650 3-4690042000 4-6880043000 5-6440021000 6-734502800

18.  Useful at many stages of project management  Mathematically simple  Give critical path and slack time  Provide project documentation  Useful in monitoring costs 18 How long will the entire project take to be completed? What are the risks involved? Which are the critical activities or tasks in the project which could delay the entire project if they were not completed on time? Is the project on schedule, behind schedule or ahead of schedule? If the project has to be finished earlier than planned, what is the best way to do this at the least cost? CPM/PERT can answer the following important questions:

19.  Clearly defined, independent and stable activities  Specified precedence relationships  Over emphasis on critical paths  Deterministic CPM model  Activity time estimates are subjective and depend on judgment  PERT assumes a beta distribution for these time estimates, but the actual distribution may be different  PERT consistently underestimates the expected project completion time due to alternate paths becoming critical 19 To overcome the limitation, Monte Carlo simulations can be performed on the network to eliminate the optimistic bias

20.  Men, Material, Money are three resources required for any activity.  If shortage of resources the activity cannot be completed in time  Project mgr has to come across resource constraints Hence the job of project mgr is to plan and allocate resources for different activities so that resource utilization is optimized. 20

21.  Resource Leveling – analysis aims at stabilization of rate of resource utilization by various activities at different times without changing the project duration  Resource Smoothing (Loading)- analysis aims to reduce peak demand for resources and reallocating among activities of a project in a manner so that the total project duration remains shortest 21

22. ActivityPreceding Activity Duration (Days)Total Manpower required A-360 B-484 CA222 DA336 EB672 FD,E318 GC535 HF642 IG,H756 22

23. ActivityImmediate Predecessor Duration (Days)Total cash flow required for the activity (Rs. Lakhs) A-525 B-530 CA1040 DB728 EA612 FC,D824 GC,D615 HE,F510 IG412 23