Reducing Project Duration

CHAPTER NINE

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin

9–2

Where We Are NowWhere We Are NowWhere We Are NowWhere We Are Now

9–3

Rationale for Reducing Project DurationRationale for Reducing Project DurationRationale for Reducing Project DurationRationale for Reducing Project Duration

• 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:•Time-to-market pressures•Unforeseen delays• Incentive contracts (bonuses for early completion)• Imposed deadlines and contract commitments•Overhead and public goodwill costs•Pressure to move resources to other projects

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Options for Accelerating Project CompletionOptions for Accelerating Project CompletionOptions for Accelerating Project CompletionOptions for Accelerating Project Completion

• Resources Not Constrained–Adding resources

–Outsourcing project work

–Scheduling overtime

–Establishing a core project team

–Do it twice—fast and then correctly

• Resources Constrained–Fast-tracking

–Critical-chain

–Reducing project scope

–Compromise quality

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Explanation of Project CostsExplanation of Project CostsExplanation of Project CostsExplanation of Project Costs

• Project Indirect Costs–Are costs that cannot be associated with any

particular work package or project activity.•Supervision, administration, consultants, and

interest

–Are costs that vary (increase) with time.•Reducing project time directly reduces indirect

costs.

• Project Direct Costs–Are normal costs that can be assigned directly to

a specific work package or project activity.•Labor, materials, equipment, and subcontractors

–Increase with use of crashing activities increases

9–6

Seeking Optimal Project Duration Seeking Optimal Project Duration to Minimize Project Costto Minimize Project Cost

Seeking Optimal Project Duration Seeking Optimal Project Duration to Minimize Project Costto Minimize Project Cost

Compute total costs for each specific duration Compute total costs for each specific duration and evaluate the tradeoff between project cost and evaluate the tradeoff between project cost and duration. and duration.

Compute total costs for each specific duration Compute total costs for each specific duration and evaluate the tradeoff between project cost and evaluate the tradeoff between project cost and duration. and duration.

Search critical activities of lowest direct-cost Search critical activities of lowest direct-cost increase to shorten project duration.increase to shorten project duration.

Search critical activities of lowest direct-cost Search critical activities of lowest direct-cost increase to shorten project duration.increase to shorten project duration.

Identifying direct costs to reduce project timeIdentifying direct costs to reduce project timeIdentifying direct costs to reduce project timeIdentifying direct costs to reduce project time

Gather information about direct and indirect Gather information about direct and indirect costs of each specific project duration. costs of each specific project duration.

Gather information about direct and indirect Gather information about direct and indirect costs of each specific project duration. costs of each specific project duration.

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Project CostProject Cost–Duration Graph–Duration GraphProject CostProject Cost–Duration Graph–Duration Graph

FIGURE 9.1

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Constructing a Project CostConstructing a Project Cost–Duration Graph–Duration Graph Constructing a Project CostConstructing a Project Cost–Duration Graph–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.

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Constructing a Project CostConstructing a Project Cost––Duration Graph Duration Graph Constructing a Project CostConstructing a Project Cost––Duration Graph 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.

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Activity GraphActivity GraphActivity GraphActivity Graph

FIGURE 9.2

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CostCost–Duration Trade-off Example–Duration Trade-off ExampleCostCost–Duration Trade-off Example–Duration Trade-off Example

FIGURE 9.3

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CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)

FIGURE 9.3 (cont’d)

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CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)

FIGURE 9.4

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CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)

FIGURE 9.4 (cont’d)

9–15

Summary Costs by DurationSummary Costs by DurationSummary Costs by DurationSummary Costs by Duration

FIGURE 9.5

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Project CostProject Cost–Duration Graph–Duration GraphProject CostProject Cost–Duration Graph–Duration Graph

FIGURE 9.6

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Practical ConsiderationsPractical ConsiderationsPractical ConsiderationsPractical Considerations• Using the Project Cost–Duration Graph

– For cost-duration tradeoff decision

• Crash Times– It is more difficult to estimate than normal time and cost

• Linearity Assumption– However, usually crashing is “all or none.” It is not as practical to do partial

crashing of an activity.

• Choice of Activities to Crash Revisited– In addition to choosing the cheapest crashing method, other factors such as risk

and resource availability (at the time of need) should be considered as well.

• Time Reduction Decisions and Sensitivity– A project is sensitive if it has several critical or near-critical paths.

– Compression of projects with several near critical paths reduces scheduling flexibility and increases the risk of delaying the project.

9–18

What if Cost, Not Time Is the Issue?What if Cost, Not Time Is the Issue?What if Cost, Not Time Is the Issue?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

9–19

Key TermsKey TermsKey TermsKey Terms

Crashing

Crash point

Crash time

Direct costs

Fast-tracking

Indirect costs

Outsourcing

Project cost–duration graph