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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

Project cost-duration graph FIGURE 9.1 ISE 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes

Project cost-duration graph FIGURE 9.6 ISE 491 - Ch. 9 notes

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 491 - Ch. 9 notes

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 491 - Ch. 9 notes