Time-Cost Tradeoff

Time-Cost Tradeoff
O Is an attempt to answer what is the relationship
between how long something takes and how
much it costs.

O To answer this question we have to go back to the

components of cost, we have to breakdown costs
in its two components

Total Cost = Direct Cost + Indirect Cost

Project Costs

O Direct Cost : a price that can be completely

attributed to the production of specific
goods or service
Example : labors wages, materials

O Indirect Cost : it is difficult to assign to a

specific product
Time-Cost Curve
 O In any project , resource demands and
activity durations are usually estimated in
the most economical way .
O These estimations are determined from
the past experience or historical data
obtained from a similar projects*.

*Dr. Abdullah Qudah handout

Project crashing is a method for shortening the
project duration by reducing the time of one (or
more) of the critical project activities to less than
its normal activity time. This reduction in the
normal activity time is referred to as crashing.
Crashing is achieved by devoting more resources,
or by adopting more productive
technique/method for accomplishing the work.
Usually measured in terms of dollars, to the
activities to be crashed.
Time-Cost Tradeoff
O Normal Point : the cost and time when the activity is
performed in the normal way without extra resources,
improved equipment or other materials that could
expedite the activity.

The normal duration is associated with the lowest
cost option for the activity. It is this value that is used in
a CPM analysis and in the preparation of the initial
budget

O Crash Point: the cost and time when the activity is

expedited by the use of extra resources, manpower,
etc. No cost is spared to reduce the duration of the
activity as much as possible.
Example 1: consider the following network of a project consisting of
nine activities with a scheduled project duration of 32 weeks.

C G
9 12
A
7
D
11
PS H PF
13
E
8
B
8
F I
10 14
And the following table of time-cost data.

Activity Normal Crashing Normal Crashing Allowable Cc/week

Time, tn Time, tc Cost, Cn Cost, Cc Crash
A 7 6 600 750 1 150
B 8 6 750 900 2 75
C 9 7 900 1,100 2 100
D 11 8 1,100 1,400 3 100
E 8 5 850 1,200 3 116.67
F 10 7 1,000 1,300 3 100
G 12 10 1,300 1,500 2 100
H 13 11 1,400 1,500 2 50
I 14 10 1,500 2,000 4 125
Determine the minimum possible duration of the
project and the cost of the project at minimum
duration.


    


/  


- Crashing should be for activities on critical paths

- On each critical path, select the activity of
minimum crashing cost.
O Solution
All possible paths
1. A-C-G
28 weeks
2. A-D-H
31 weeks
3. B-E-H
29 weeks
4. B-F-I
32 weeks

• Critical path = B-F-I

• Project duration = 32 weeks
• Direct cost = $ 9,400
Step 1
• Critical path = B-F-I
• Crashing options:
- B @ $75/week
- F @ $ 100/week
- I @ @125/week
• Decision : Crash B by 1 week @ $75/week
• Project duration = 31 weeks
• Direct cost = $ 9,475
Step 2
• Critical paths = B-F-I, A-D-H
• Crashing options:
B-F-I A-D-H
B @ $75/week A @ $150/week
F @ $ 100/week D @ $100/week
I @ @125/week H @ $50/week

• Decision : Crash B and H by 1 week @ $125/week

• Project duration = 30 weeks
• Direct cost = $ 9,600
Step 3
• Critical paths = B-F-I, A-D-H
• Crashing options:
B-F-I A-D-H
F @ $ 100/week A @ $150/week
I @ @125/week D @ $100/week
H @ $50/week

• Decision : Crash F and H by 1 week @ $150/week

• Project duration = 29 weeks
• Direct cost = $ 9,750
Step 4
• Critical paths = B-F-I, A-D-H
• Crashing options:

B-F-I A-D-H
F @ $ 100/week A @ $150/week
I @ @125/week D @ $100/week

• Decision : Crash F and D by 1 week @ $200/week

• Project duration = 28 weeks
• Direct cost = $ 9,950
Step 5
• Critical paths = B-F-I, A-D-H, A-C-G
• Crashing options:
B-F-I A-D-H A-C-G
F @ $ 100/week A @ $150/week A @ $150/week
I @ @125/week D @ $100/week C @ $100/week
G @ $100/week
• Decision : Crash F and A by 1 week @ $250/week
• Project duration = 27 weeks
• Direct cost = $ 10,200
Step 6
• Critical paths = B-F-I, A-D-H, A-C-G
• Crashing options:

B-F-I A-D-H A-C-G

I @ @125/week D @ $100/week C @ $100/week
G @ $100/week

• Decision : Crash I, D and C by 2 weeks @

$325/week
• Project duration = 25 weeks
• Direct cost = $ 10,850
Consider :
O Indirect Cost of $200 per week

Project Duration (Weeks) 25 27 28 29 30 31 32

Direct Cost ($) 10,850 10,200 9,950 9,750 9,600 9,475 9,400

Indirect Cost ($) 5,000 5,400 5,600 5,800 6,000 6,200 6,400

Total Cost ($) 15,850 15,600 15,550 15,550 15,600 15,675 15,800
 18000

16000

14000

12000

10000
Cost ($)

Direct Cost ($)

8000 Indirect Cost ($)
Total Cost ($)
6000

4000

2000

0
25 26 27 28 29 30 31 32 33
Project Duration (Weeks)
 Consider :
O Indirect Cost of $200 per week
O Delay damages of $500 per week for Project duration
beyond 30 weeks.

Project Duration
(Weeks) 25 27 28 29 30 31 32

Direct Cost ($) 10,850 10,200 9,950 9,750 9,600 9,475 9,400

Indirect Cost ($) 5,000 5,400 5,600 5,800 6,000 6,200 6,400

Liquidated Damages ($) 0 0 0 0 0 500 1,000

Total Cost ($) 15,850 15,600 15,550 15,550 15,600 16,175 16,800
 18,000

16,000

14,000

12,000
Cost ($)

10,000
Direct Cost ($)
Indirect Cost ($)
8,000
Liquidated Damages ($)
6,000 Total Cost ($)

4,000

2,000

0
25 26 27 28 29 30 31 32 33
Project Duration (weeks)
 Example 2: For the given project
Activity Depends Normal Crash Normal Crash cost
upon time time cost
A - 7 3 3000 3600
B A 8 7 1700 2000
C A 10 6 2200 2400
D A 5 2 2400 3000
E B, C, D, A 7 3 1900 2500
F C, D, A 5 4 800 1000
G E, F, A, B, 3 1 500 900
C, D
1. The duration that I can decrease so that the cost of crashing
does not exceed 400$
2. The cost of decreasing the project duration by six days is
3. The min. duration of the project
4. The total cost of the project at min. duration is