Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 1 Reasons to Reduce...
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Transcript of Spring 2008, King Saud University Time-Cost-Trade-off Dr. Khalid Al-Gahtani 1 Reasons to Reduce...
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
1
Reasons to Reduce Project Durations:
1. To realize incentive pay2. 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-offDr. 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-offDr. Khalid Al-Gahtani
3
Project Costs Definitions
Spring 2008, King Saud University
Time-Cost-Trade-offDr. 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-offDr. Khalid Al-Gahtani
5
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
6
Accelerating the Critical and Noncritical path
Spring 2008, King Saud University
Time-Cost-Trade-offDr. 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 :cost slope = crash cost - normal cost
normal duration- crash duration
Network Compression Algorithm
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
8
• shortening the CRITICAL ACTIVITIES beginning with the activity having the lowest cost-slope
• Determine the compression limit (Nil)
- Crash Limit, or Nil = Min - Free Float of any of the non critical activities in the parallel paths competing for critical path.*
Network Compression Algorithm
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
9
• Organize the data as in the following table:•
• Update the project network
Cycle #
Activity to Shorten
Can Be Shortened
Nil Days
Shortened Cost per
Day Cost for Cycle
Total Cost
Project Duration
0 1 2 3
Network Compression Algorithm
Spring 2008, King Saud University
Time-Cost-Trade-offDr. 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-offDr. Khalid Al-Gahtani
11
• Continue until no further shortening is possible • Tabulate and Plot the Indirect project Cost on
the same time-cost graph
Cycle #
Project Duration
Direct Cost
Indirect Cost
Total Cost
0 1 2 3
Network Compression Algorithm
Spring 2008, King Saud University
Time-Cost-Trade-offDr. 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
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
13
Example 1: The durations and direct costs for each activity in the network of a small construction contract under both normal and crash conditions are given in below Table. Establish the least cost for expediting the contract. Determine the optimum duration of the contract assuming the indirect cost amounts to SR 125/week.
Normal Crash Activity Preceded by Duration
(weeks) Cost (SR)
Duration (weeks)
Cost (SR)
A — 12 7000 10 7200 B A 8 5000 6 5300 C A 15 4000 12 4600 D B 23 5000 23 5000 E B 5 1000 4 1050 F C 5 3000 4 3300 G E,C 20 6000 15 6300 H F 13 2500 11 2580 I D, G, H 12 3000 10 3150 36,500
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
14
2@100
0 12 12
0 0 12 A
1@300
27 5 32
29 2 34 F
3@200
12 15 27
12 0 27 C
2@150
12 8 20
14 2 22 B
0
20 23 43
24 4 47 D
1@50
20 5 25
22 2 27 E
5@60
27 20 47
27 0 47 G
2@75
47 12 59
47 0 59 I
2@40
32 13 45
34 2 47 H ES D EF
LS F LF Activity
Crash limit
4
2
Cycle #
Activity to Shorten
Can Be Shortened
Nil Days
Shortened Cost per
Week Cost for Cycle
Total Cost
Project Duration
0 36,500 59 1 G 5 2 2 60 120 36,620 57
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
15
2@100
0 12 12
0 0 12 A
1@300
27 5 32
27 0 32 F
3@200
12 15 27
12 0 27 C
2@150
12 8 20
14 2 22 B
0
20 23 43
22 2 45 D
1@50
20 5 25
22 2 27 E
3@60
27 18 45
27 0 47 G
0
45 12 57
45 0 55 I
2@40
32 13 45
32 0 45 H
ES D EF
LS F LF Activity
Crash limit
Cycle #
Activity to Shorten
Can Be Shortened
Nil Days
Shortened Cost per
Week Cost for Cycle
Total Cost
Project Duration
0 36,500 59 1 G 5 2 2 60 120 36,620 57 2 I 2 2 2 70 140 36,760 55
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
16
2@100
0 12 12
0 0 12 A
1@300
27 5 32
27 0 32 F
3@200
12 15 27
12 0 27 C
2@150
12 8 20
14 2 22 B
0
20 23 43
22 2 45 D
1@50
20 5 25
22 2 27 E
3@60
27 18 45
27 0 45 G
0
45 10 55
45 0 55 I
2@40
32 13 45
32 0 45 H
ES D EF
LS F LF Activity
Crash limit
0
Cycle #
Activity to Shorten
Can Be Shortened
Nil Days
Shortened Cost per
Week Cost for Cycle
Total Cost
Project Duration
0 36,500 59 1 G 5 2 2 60 120 36,620 57 2 I 2 2 70 140 36,760 55 3 A 2 2 100 200 36,960 53
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
17
0
0 10 10
0 0 10 A
1@300
25 5 30
25 0 30 F
3@200
10 15 25
10 0 25 C
2@150
10 8 18
12 2 20 B
0
18 23 41
20 2 43 D
1@50
20 5 25
22 2 27 E
3@60
25 18 43
25 0 43 G
0
43 10 53
43 0 53 I
2@40
30 13 43
30 0 43 H
ES D EF
LS F LF Activity
Crash limit
2
Cycle #
Activity to Shorten
Can Be Shortened
Nil Days
Shortened Cost per
Week Cost for Cycle
Total Cost
Project Duration
0 36,500 59 1 G 5 2 2 60 120 36,620 57 2 I 2 2 70 140 36,760 55 3 A 2 2 100 200 36,960 53 4 H, G 2 2 2 60+40 200 37,160 51
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
18
0
0 10 10
0 0 10 A
1@300
25 5 30
25 0 30 F
3@200
10 15 25
10 0 25 C
2@150
10 8 18
10 0 18 B
0
18 23 41
18 0 41 D
1@50
18 5 23
20 2 25 E
1@60
25 16 41
25 0 41 G
0
41 10 51
41 0 51 I
0
30 11 41
30 0 41 H
ES D EF
LS F LF Activity
Crash limit
0
Cycle #
Activity to Shorten
Can Be Shortened
Nil Days
Shortened Cost per
Week Cost for Cycle
Total Cost
Project Duration
0 36,500 59 1 G 5 2 2 60 120 36,620 57 2 I 2 2 70 140 36,760 55 3 A 2 2 100 200 36,960 53 4 G, H 2 2 2 60+40 200 37,160 51 5 B, C 2 2 150+200 700 37,860 49
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
19
0
0 10 10
0 0 10 A
1@300
23 5 28
23 0 28 F
1@200
10 13 23
10 0 23 C
0
10 6 16
10 0 16 B
0
16 23 39
16 0 39 D
1@50
16 5 21
18 2 23 E
1@60
23 16 39
23 0 39 G
0
39 10 49
39 0 49 I
0
28 11 39
28 0 39 H
ES D EF
LS F LF Activity
Crash limit
Cycle #
Project Duration
Direct Cost
Indirect Cost
Total Cost
0 59 36500 7375 43875 1 57 36620 7125 43745 2 55 36760 6875 43635 3 53 36960 6625 43585 4 51 37160 6375 43535 5 49 37860 6125 43985
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
20
Project Optimal Duration
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
48 49 50 51 52 53 54 55 56 57 58 59 60
Project Duration (Week)
Co
st (
SR
)
DirectCost
Indirect cost
TotalCost
Spring 2008, King Saud University
Time-Cost-Trade-offDr. Khalid Al-Gahtani
21
Class Work #2
Data on small maintenance project is given as below:
Depends Normal Crash Activity on Time Cost Time Cost
A 6 days $700 4 days $800 B 4 days 400 4 days 400 C 5 days 650 4 days 700 D A 8 days 625 5 days 700 E B 10 days 200 7 days 350 F B 7 days 500 5 days 700 G C 3 days 600 3 days 600 H D, E 6 days 300 5 days 400 I F, G 7 days 350 4 days 425
On completion, the project will give a return of $110/day. Using time-cost trade-off method, how much would you like to compress the project for maximizing the return? Show all calculations.