TIME – COST TRADEOFF

ANALYSIS

(PROJECT CRASHING)

June 30, 2018 1

 REDUCING THE PROJECT/ACTIVITY DURATION
TO GET IT COMPLETED IN LESS THAN
NORMALLY SCHEDULED DURATION IS CALLED
CRASHING

 BUT
TO COMPLETE IN LESSER DURATION
REQUIRES ALLOCATION OF MORE RESOURCES

June 30, 2018 2

 Toreduce the scheduled completion time to
reap the results of the project sooner.

 Asproject continue over time, the team

consume indirect costs. There may be direct
financial penalties for not completing a
project on time.

June 30, 2018 3

 Any activity that is on the critical path
 Activities with relatively long durations
 Activities with relatively low costs to crash
 Activities that are not likely to cause quality
problems if crashed
 Activities that occur relatively early in the
schedule and are labor intensive

Source: Magnan 2004

June 30, 2018 4

Normal Time/Duration

• Time to complete an activity under normal conditions or under normal

schedule

Crash Time/Duration

• Minimum Time to complete an activity with extra resources

Normal Cost

• Cost to complete an activity as normally scheduled/under normal

conditions

Crash Cost

• Crash cost is the total cost incurred if the activity is complete in

normal time plus the extra cost incurred to complete it in the
minimum possible time
June 30, 2018 5
 Adding Resources
 Outsourcing Project Work
 Overtime
 Establishing Core Project Team
 Temporary Fixes
 Fast-Tracking
 Critical Chain PM
 Brainstorming
 Reducing Scope
 Phasing Project Deliverables
Source: Magnan 2004

June 30, 2018 6

PROJECT DIRECT COSTS: Directly assigned to work package or
activity

 “Normal” costs for “normal” time including Direct labor

expenses, Materials, Equipment, Subcontractors, Overtime

 They vary directly with your volume of output.

 They generally increase as the duration of a project is

shortened.

June 30, 2018 7

INDIRECT EXPENSES: Cannot be associated with any work
package or activity

 Overhead expenses, including supervisory expenses,

administration, contractual penalties or early completion,
incentives, consulting, insurance, start-up, security, marketing,
goodwill, interest charges

 They are fixed periodic costs.

 They generally decrease as the duration of a project is

shortened.

June 30, 2018 8

Project crashing costs and indirect costs have an inverse
relationship; crashing costs are highest when the project is
shortened, whereas indirect costs Increase as the project duration
increases. So, the best project time is at the minimum point on
the total cost curve as below:

June 30, 2018 9

 Step1: Determine critical path (precedence
diagram or aoa)

 Step2: Determine all average unit crash cost

(schedule)

 Step 3: Calculate the Overall Cost

June 30, 2018 10

 REQUIRED TIME (WEEKS COST (RM)
ACTIVITY PRECEDED BY

Normal Crash Normal Crash

A - 12 7 3,000 5,000

B A 8 5 2,000 3,500

C B 4 3 4,000 7,000

D C 0 0 - -

E B,C 4 1 500 1,100

F D 12 9 50,000 71,000

G D,E 4 1 500 1,250

H F,G 4 3 15,000 22,000

Note: This schedule is given

11
Task:
 The home builder needed the house in 20
weeks & calculate the overall cost
 Tasks should be adjusted to shortened by 6
weeks are task A & B

June 30, 2018 12

 Prepare precedence diagram
 Identify critical path

June 30, 2018 13

ACTIVI PRECE REQUIRED TIME TOTAL COST (RM) TOTAL TOTAL CRASH TOTAL
TY DED BY (WEEKS CRASH CRASH CRASH FOR 6 CRASH
TIME COST COST WEEKS FOR 6
Normal Crash Normal Crash
(WEEK (RM) /WEEK WEEKS
S) (RM) (RM)

(Direct
Cost)

A - 12 7 5 3,000 5,000 2,000 400 5 2,000

B A 8 5 3 2,000 3,500 1,500 500 1 500

C B 4 3 1 4,000 7,000 - -
D C 0 0 0 - - - -
E B,C 4 1 3 500 1,100 - -
F D 12 9 3 50,000 71,000 21,000 7,000

G D,E 4 1 3 500 1,250 - -

H F 4 3 1 15,000 22,000 7,000 7,000

19 75,000 2,500

14
NOTES FOR SCHEDULE PREPARATION:

TOTAL CRASH TIME = NORMAL TIME – CRASH TIME

TOTAL CRASH COST = CRASH COST – NORMAL COST

TOTAL CRASH COST PER WEEK = TOTAL CRASH COST

TOTAL CRASH TIME

June 30, 2018 15

OVERALL COST = Normal Cost + Total Crash for 6 Weeks

=RM 75,000 + RM 2,500.00

= RM 77,500

June 30, 2018 16

 REQUIRED TIME (WEEKS) COST (RM)
ACTIVITY DEPENDENCY
Normal Crash Normal Crash

A - 6 5 500,000 505,000

B A 22 20 1,200,000 1,250,000

C A 8 8 620,000 620,000

D B 12 12 640,000 640,000

E C 10 8 600,000 605,000

F C,D 20 18 1,000,000 1,110,000

G C 12 10 700,000 704,000

H G,E 6 6 610,000 610,000

I F 20 19 850,000 860,000

J I.G 16 12 750,000 770,000

K G,H,J 5 5 600,000 607,000

17
1) Precedence diagram network
2) The project completion time = 101 DAYS
3) The critical activities and highlight the Critical Path
= A,B,D,F,I,J & K
4) The Total Float for the non-critical activities =
C(26),E(66),G(54) & H(64)
5) The maximum construction period that can be
crashed = 14 WEEKS
6) To speed up the construction period by four weeks,
proposed which activities that would be shortened
and calculate the additional cost required =
ACTIVITY J (4 WEEKS) OR ACTIVITY A (1 WEEK) &
ACTIVITY J (3 WEEKS)
7) The overall cost for the project after shortened by
four weeks = RM 8,070,000 + RM 20,000
= RM 8,090,000
June 30, 2018 18
 6 22 28 28 12 40 40 20 60 60 20 80
B D F I
6 0 28 28 0 40 40 0 60 60 0 80

0 6 6
A
0 0 6

6 8 14
C 14 10 24 26 6 32
32 26 40 E H
80 66 90 90 64 96

14 12 26 80 16 96 96 5 101
G J K
68 54 80 80 0 96 96 0 101

June 30, 2018 19

 REQUIRED TIME COST (RM) TOTAL TOTAL CRASH
PRECEDED TOTAL CRASH TOTAL CRASH/WEEK CRASH FOR FOR 4 WEEKS
ACTIVITY BY NORMAL CRASH (WEEKS) NORMAL CRASH CRASH (RM) (RM) 4 WEEKS (RM)

A - 6 5 1 500,000 505,000 5,000 5,000.00 1 5,000.00

B A 22 20 2 1,200,000 1,250,000 50,000 25,000.00

C A 8 8 0 620,000 620,000 0 -

D B 12 12 0 640,000 640,000 0 -

E C 10 8 2 600,000 605,000 5,000 2,500.00

F C,D 20 18 2 1,000,000 1,110,000 110,000 55,000.00

G C 12 10 2 700,000 704,000 4,000 2,000.00

H G,E 6 6 0 610,000 610,000 0 -

I F 20 19 1 850,000 860,000 10,000 10,000.00

J I.G 16 12 4 750,000 770,000 20,000 5,000.00 3 15,000

K G,H,J 5 5 0 600,000 607,000 7,000 -

Total Direct
14 8,070,000 Cost 20,000

20
YELLOW = CRITICAL PATH
OVERALL COST = Normal Cost + Total Crash for 4 Weeks (Direct Cost)

=RM 8,070,000 + RM 20,000

= RM 8,090,000

June 30, 2018 21

ASSUME WEEKLY INDIRECT COST OF RM125.

NORMAL CRASH
ACTIVITY DEPENDENCY

WEEKS COST (RM) WEEKS COST (RM)

A - 12 70,000 10 72,000

B A 8 50,000 6 53,000

C A 15 40,000 12 46,000

D B 23 50,000 23 50,000

E B 5 10,000 4 10,500

F C 5 30,000 4 33,000

G E,C 20 60,000 15 63,000

H F 13 25,000 11 25,800

I D,G,H 12 30,000 10 31,500

22
 The project duration should be crash to
49weeks.
 Based on schedule, determine the following:
 Precedence diagram network
 The project completion time
 The critical activities and highlight the critical path
 The Total Float for the non-critical activities
 Crash the critical path activities and calculate the
direct cost after the activities have been crashed to
49 weeks
 The total cost for the project after crashed to
49weeks
 If the client request to crash the duration to
50weeks, what will happened to the direct cost,
indirect cost, total cost and new critical path
activities. Advice the client.
June 30, 2018 23