Time cost-trade-off

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Time cost-trade-off

  1. 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, Time-Cost-Trade-off 1 King Saud University Dr. Khalid Al-Gahtani
  2. 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, Time-Cost-Trade-off 2King Saud University Dr. Khalid Al-Gahtani
  3. 3. Project Costs DefinitionsSpring 2008, Time-Cost-Trade-off 3King Saud University Dr. Khalid Al-Gahtani
  4. 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, Time-Cost-Trade-off 4King Saud University Dr. Khalid Al-Gahtani
  5. 5. Spring 2008, Time-Cost-Trade-off 5King Saud University Dr. Khalid Al-Gahtani
  6. 6. Accelerating the Critical and Noncritical pathSpring 2008, Time-Cost-Trade-off 6King Saud University Dr. Khalid Al-Gahtani
  7. 7. Network Compression Algorithm• 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 : co st slo pe = crash co st - no rmal co st no rmal duratio n- crash duratio nSpring 2008, Time-Cost-Trade-off 7King Saud University Dr. Khalid Al-Gahtani
  8. 8. Network Compression Algorithm• shortening the CRITICAL ACTIVITIES beginning with the activity having the lowest cost-slope• Determine the compression limit (Nil) - C rash L im it, or N il = M in - Free F lo at o f any o f the no n crit ica l a ctivit ie s in the para lle l paths co m pet ing fo r crit ica l path.*Spring 2008, Time-Cost-Trade-off 8King Saud University Dr. Khalid Al-Gahtani
  9. 9. Network Compression Algorithm• Organize the data as in the following table:• yc le toAS ho rten S C artened N il S ho rtened C oDsta y CC yc le r T otal DPuratio nC # ct ivit y ho n Be D a ys per o st fo C o st ro ject 0 1 2 3• Update the project networkSpring 2008, Time-Cost-Trade-off 9King Saud University Dr. Khalid Al-Gahtani
  10. 10. Network Compression Algorithm• 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 costSpring 2008, Time-Cost-Trade-off 10King Saud University Dr. Khalid Al-Gahtani
  11. 11. Network Compression Algorithm• Continue until no further shortening is possible• Tabulate and Plot the Indirect project Cost on the same time-cost graph C yc le P ro ject D irect Ind ire ct T otal # D uratio n C o st C o st C o st 0 1 2 3 Spring 2008, Time-Cost-Trade-off 11 King Saud University Dr. Khalid Al-Gahtani
  12. 12. Network Compression Algorithm• 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.Spring 2008, Time-Cost-Trade-off 12King Saud University Dr. Khalid Al-Gahtani
  13. 13. E xa m p le 1: T he duratio ns a nd d irect co sts fo r each activity in the netw o rk o f a sm a ll co nstructio nco ntract under bo th no rm a l a nd crash co nd it io ns are g ive n in be lo w T able. E stablish the leastco st fo r exped iting the co ntract . D eterm ine the o ptim u m duratio n o f the co ntract assu m ing theind irect co st am o unts to S R 125/w eek. N o rm a l C rash A ctivity P receded by D uratio n C o st D uratio n C o st (w eeks) (S R ) (w eeks) (S R ) 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, Time-Cost-Trade-off 13 King Saud University Dr. Khalid Al-Gahtani
  14. 14. 20 23 43 D 4 24 4 47 00 12 12 12 8 20 20 5 25 27 20 47 47 12 59 A B E G I0 0 12 14 2 22 22 2 27 27 0 47 47 0 59 2@ 100 2@ 150 1@ 50 5@ 60 2@ 75 2 12 15 27 27 5 32 32 13 45 ES D EF C F H A ctivity 12 0 27 29 2 34 34 2 47 LS F LF 3@ 200 1@ 300 2@ 40 C rash lim itC yc le A ct ivit y Can Be D a ys C o st per C o st fo r T otal P ro ject N il # to S ho rten S ho rtened S ho rtened W e ek C yc le C o st D uratio n 0 3 6 ,5 0 0 59 1 G 5 2 2 60 120 3 6 ,6 2 0 57Spring 2008, Time-Cost-Trade-off 14King Saud University Dr. Khalid Al-Gahtani
  15. 15. 20 23 43 D 22 2 45 00 12 12 12 8 20 20 5 25 27 18 45 45 12 57 A B E G I0 0 12 14 2 22 22 2 27 27 0 47 45 0 55 2@ 100 2@ 150 1@ 50 3@ 60 0 12 15 27 27 5 32 32 13 45 ES D EF C F H A ctivity 12 0 27 27 0 32 32 0 45 3@ 200 1@ 300 2@ 40 LS F LF C rash lim it C yc le A ct ivit y Can Be D a ys C o st per C o st fo r T otal P ro ject N il # to S ho rten S ho rtened S ho rtened W e ek C yc le C o st D uratio n 0 36,500 59 1 G 5 2 2 60 120 36,620 57 2 I 2 2 2 70 140 36,760 55Spring 2008, Time-Cost-Trade-off 15King Saud University Dr. Khalid Al-Gahtani
  16. 16. 20 23 43 D 22 2 45 00 12 12 12 8 20 20 5 25 27 18 45 45 10 55 A 0 B E G I0 0 12 14 2 22 22 2 27 27 0 45 45 0 55 2@ 100 2@ 150 1@ 50 3@ 60 0 12 15 27 27 5 32 32 13 45 ES D EF C F H A ctivity 12 0 27 27 0 32 32 0 45 LS F LF 3@ 200 1@ 300 2@ 40 C rash lim it C yc le A ct ivit y Can Be D a ys C o st per C o st fo r T otal P ro ject N il # to S ho rten S ho rtened S ho rtened W e ek C yc le C o st D uratio n 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 53Spring 2008, Time-Cost-Trade-off 16King Saud University Dr. Khalid Al-Gahtani
  17. 17. 18 23 41 D 2 20 2 43 00 10 10 10 8 18 20 5 25 25 18 43 43 10 53 A B E G I0 0 10 12 2 20 22 2 27 25 0 43 43 0 53 0 2@ 150 1@ 50 3@ 60 0 10 15 25 25 5 30 30 13 43 ES D EF C F H A ctivity 10 0 25 25 0 30 30 0 43 LS F LF 3@ 200 1@ 300 2@ 40 C rash lim itC yc le A ct ivit y Can Be D a ys C o st per C o st fo r T otal P ro ject N il # to S ho rten S ho rtened S ho rtened W e ek C yc le C o st D uratio n 0 36 ,500 59 1 G 5 2 2 60 1 20 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 51Spring 2008, Time-Cost-Trade-off 17King Saud University Dr. Khalid Al-Gahtani
  18. 18. 18 23 41 D 18 0 41 00 10 10 10 8 18 18 5 23 25 16 41 41 10 51 A B 0 E G I0 0 10 10 0 18 20 2 25 25 0 41 41 0 51 0 2@ 150 1@ 50 1@ 60 0 10 15 25 25 5 30 30 11 41 ES D EF C F H A ctivity 10 0 25 25 0 30 30 0 41 LS F LF 3@ 200 1@ 300 0 C rash lim itC yc le A ct ivit y Can Be D a ys C o st per C o st fo r T otal P ro ject N il # to S ho rten S ho rtened S ho rtened W e ek C yc le C o st D uratio n 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 51Spring 2008, Time-Cost-Trade-off 18 5 B, CKing Saud University 2 2 150+ 200 Dr. Khalid Al-Gahtani 700 37,860 49
  19. 19. 16 23 39 D 16 0 39 0 0 10 10 10 6 16 16 5 21 23 16 39 39 10 49 A B E G I 0 0 10 10 0 16 18 2 23 23 0 39 39 0 49 0 0 1@ 50 1@ 60 0 10 13 23 23 5 28 28 11 39 ES D EF C F H A ctivity 10 0 23 23 0 28 28 0 39 1@ 200 1@ 300 0 LS F LF C rash lim it C yc le P ro ject D irect Ind ire ct T otal # D uratio n C o st C o st C o st 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 43985Spring 2008, Time-Cost-Trade-off 19King Saud University Dr. Khalid Al-Gahtani
  20. 20. Project Optimal Duration 50000 45000 40000 35000 Direct CostCost (SR) 30000 Indirect 25000 cost 20000 Total 15000 Cost 10000 5000 0 48 49 50 51 52 53 54 55 56 57 58 59 60 Project Duration (Week) Spring 2008, Time-Cost-Trade-off 20 King Saud University Dr. Khalid Al-Gahtani
  21. 21. C la ss W o rk #2D ata o n sm a ll m a inte na nce pro ject is g ive n a s be lo w : D epend s N o rm a l C rash A ct ivit y on T im e C o st T im e C o st A 6 da ys $700 4 da ys $800 B 4 da ys 400 4 da ys 400 C 5 da ys 650 4 da ys 700 D A 8 da ys 625 5 da ys 700 E B 10 da ys 200 7 da ys 350 F B 7 da ys 500 5 da ys 700 G C 3 da ys 600 3 da ys 600 H D, E 6 da ys 300 5 da ys 400 I F, G 7 da ys 350 4 da ys 425O n co m p let io n, the pro ject w ill g ive a return o f $110/da y. U sing t im e-co st trade-o ff m etho d,ho w m u c h w o uld yo u like to co m press the pro ject fo r m a xim iz ing the return? S ho w allca lcu lat io ns. Spring 2008, Time-Cost-Trade-off 21 King Saud University Dr. Khalid Al-Gahtani

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