Time-Cost

Trade-Off

Time-Cost Trade-Off

Duration and cost of activity depends on the amount an type

of resources used

Assuming more workers will normally reduce time and will

change its cost

This relationship between activity time and cost called

time-cost Trade off

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Why do we need to reduce project time?

Finish the project in a predefined deadline date

Recover early delays to avoid liquidated damages

Free key resources early for other projects

Avoid adverse weather conditions that might affect productivity

Receive an early completion-bonus

Improve project cash flow

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
What is the way to reduce activity duration?

Working extended hours (Over time)

Offering incentive payments to increase the productivity

Using additional resources

Using materials with faster installation methods

Using alternate construction methods or sequence

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Activity Time-Cost Relationship

Decreasing activity duration will increase its cost

Cost
Crash duration
&
Crash cost

Normal duration
&
Normal cost
Time

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Activity Time-Cost Relationship

Cost

Crash duration
&
Crash cost

Normal duration
&
Normal cost

Time

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Activity Time-Cost Relationship

For simplicity, linear relationship is adopted

Cost

Crash duration
&
Crash cost

Normal duration
&
Normal cost
Time

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Activity Time-Cost Relationship (Example)

Consider the following options

Estimated daily
production
(square meter)

Crew size
(men)

Crew formation

166

1 scaffold set, 2 labors, 2 carpenter, 1 foreman

204

2 scaffold set, 3 labors, 2 carpenter, 1 foreman

230

2 scaffold set, 3 labors, 3 carpenter, 1 foreman

Consider the following rates: Labor LE 96/day;

carpenter LE 128/day;
foreman LE144/day and
scaffolding LE60/day
13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Activity Time-Cost Relationship (Example)

8400 Sq meters of scaffolds

Crew
size

Duration (days)

Cost (LE)

50.6 (use 51)

51 x (1x60 + 2x96 + 2x128 + 1x144) = 33252

41.2 (use 42)

42 x (2x60 + 3x96 + 2x128 + 1x144) = 33936

36.5 (use 37)

37 x (2x60 + 3x96 + 3x128 + 1x144) = 34632

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Activity Time-Cost Relationship (Example)

34800

34600

Cost (LE)

34400
34200
34000

33800
33600
33400

33200
33000
30

35

40

45

50

55

Duration (days)

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Project Time-Cost Relationship

Project direct cost = summation of direct cost of individual

activities

Indirect cost comprises site and head office overheads

Project indirect cost = daily indirect cost x project duration

Direct cost increases as project duration decreases

Indirect cost decreases as project duration decreases

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Project Time-Cost Relationship
Project cost

Project duration

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Shortening Project Duration (Optimum Duration)

It might be necessary to shorten project duration to meet

specific deadline

Or to determine the optimum project duration that is

correspond to the least project total cost

Many approaches can be used

Heuristic Cost-Slope method will be applied

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Procedure for Shortening Project Duration

Draw the project network.

Perform CPM calculations and identify the critical path, use
normal durations and costs for all activities.

Compute the cost slope for each activity from the following
equation: cost

slope = crash cost normal cost /

normal duration crash duration

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Procedure for Shortening Project Duration

Start by shortening the activity duration on the critical path

which has the least cost slope and not been shortened to its
crash duration.

Reduce the duration of the critical activities with least cost slope
until its crash duration is reached or until the critical path
changes.

When multiple critical paths are involved, the activity(ies) to be

shorten is determined by comparing the cost slope of the
activity which lies on all critical paths (if any)

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Procedure for Shortening Project Duration

Having shortened a critical path, you should adjust activities

timings, and floats.

The cost increase due to activity shortening is calculated as the

cost slope multiplied by the time of time units shortened.

Continue until no further shortening is possible, and then the

crash point is reached.

The results may be represented graphically by plotting project

completion time against cumulative cost increase.

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Example Application

Consider the following project

Indirect cost LE 125/day

Crash to 49 days

Activity

Normal

Preceded by

A
B
C
D
E
F
G
H
I

A
A
B
B
C
E, C
F
D, G, H

Duration (day)

Crash
Cost (LE)

12
8
15
23
5
5
20
13
12

7000
5000
4000
5000
1000
3000
6000
2500
3000

13/01/2002

Duration (day)
10
6
12
23
4
4
15
11
10

Cost (LE)
7200
5300
4600
5000
1050
3300
6300
2580
3150

Emad Elbeltagi

Time-Cost Trade-Off
Example Application
Total direct cost LE 36500

20

43

D (23)

12

A (12)
0

12

2@100

12

20

B (8)
14

22

2@150
12

27

C (15)
12

27

3@200

13/01/2002

24

47

20

25

E (5)
22

27

1@50
27

47

G (20)
27

47

5@60

32

F (5)
29

27

34

1@300

Emad Elbeltagi

32

47

59

I (12)
47

59

2@75
45

H (13)
34

47

2@40

Time-Cost Trade-Off
Example Application

Activity G has the least cost slope 60 LE/day

Crash G by 2 days, cost increase by 2 x 60

20

43

D (23)

12

12

A (12)
0

12

20

22

45

20

25

B (8)
14

2@100

22

2@150
12

27

22

27

13/01/2002

27

27

27

27

45

3@60

32

32

F (5)

45

57

I (12)
45

57

2@75
45

H (13)

32

32

1@300

3@200

45

G (18)

1@50

C (15)
12

27

E (5)

45

2@40

Emad Elbeltagi

Time-Cost Trade-Off
Example Application

Activity I has the least cost slope 75 LE/day

Crash I by 2 days, cost increase by 2 x 75

20
43
D (23)
22
45

0
12
A (12)

12
20
B (8)

20
25
E (5)

27
45
G (18)

0
12
2@100

14
22
2@150

22
27
1@50

27
45
3@60

12
27
C (15)
12
27
3@200

27
32
F (5)
27
32
1@300

32
45
H (13)
32
45

13/01/2002

Emad Elbeltagi

45
55
I (10)
45
55

2@40

Time-Cost Trade-Off
Example Application

Activity A has the least cost slope 100 LE/day

Crash A by 2 days, cost increase by 2 x 100

18
41
D (23)
20
43

0
10
A (10)
0
10

10
18
B (8)
12
20
2@150

18
23
E (5)
20
25
1@50

25
43
G (18)
25
43
3@60

10
25
C (15)
10
25
3@200

25
30
F (5)
25
30
1@300

30
43
H (13)
30
43
2@40

13/01/2002

43
53
I (10)
43
53

Emad Elbeltagi

Time-Cost Trade-Off
Example Application

Activity H & G has the least cost slope 100 LE/day

Crash H & G by 2 days, cost increase by 2 x 100

18

41

D (23)

10

A (10)
0

10

10

18

B (8)
10

18

2@150
10

25

C (15)
10

25

3@200

13/01/2002

18

41

18

23

E (5)
20

25

1@50
25

25

41

G (16)
25

41

41

51

I (10)
41

51

1@60
30

F (5)
25
30
1@300

Emad Elbeltagi

30

41

H (11)
30

41

Time-Cost Trade-Off
Example Application

Activity C & B has the least cost slope 350 LE/day

Crash H & G by 2 days, cost increase by 2 x 350

16
39
D (23)
16
39

0
10
A (10)
0
10

10
16
B (6)
10
16

16
21
E (5)
18
23
1@50

23
39
G (16)
23
39
1@60

10
23
C (13)
10
3
1@200

23

28
39
H (11)
28
39

13/01/2002

28
F (5)

23
28
1@300

39
49
I (10)
39
49

Emad Elbeltagi

Time-Cost Trade-Off
Example Application
Duratio
n

Direct cost X 1000 LE

Indirect cost x 1000 LE

Total cost x 1000 LE

59

36.50

7.375

43.875

57

36.62

7.125

43.745

55

36.77

6.875

43.645

53

36.97

6.625

43.595

51

37.17

6.375

43.545

49

37.87

6.125

43.995

13/01/2002

Emad Elbeltagi

Time-Cost Trade-Off
Example Application
50

LE x 1000

40
30
20
10
0
48

13/01/2002

50

52

54
56
Time (days)

Emad Elbeltagi

58

60