Time-Cost Trade-Off

(Time Reduction = Time Compression =

Time Shortening)

6/23/2017 8:42 AM 1
Reasons to Reduce Project Durations:
1. To realize incentive pay
2. To fit within the contractually required time (influences
Bid price).
3. To avoid paying Liquated Damages/Damage for delay
causes (or avoid damaging the companys
relationship).
4. To complete a project early & move on to another
project (Although the Job-specify profit may reduce,
company profile may increase).
5. To complete a project when weather conditions make
it less expensive (Avoid temporary Heating, avoid
completing site work during raining season).

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King Saud University Dr. Khalid Al-Gahtani
 Methods to reduce durations:
1. Have the existing crew work overtime. This increase
the labor costs due to increase pay rate and decrease
productivity.
2. Bring in additional workers to enlarge crew size. This
increases labor costs due to overcrowding and poor
learning curve.
3. Use better/more advanced equipment. This will usually
increase costs due to rental and transport fees. If labor
costs (per unit) are reduced, this could reduce costs.
4. Add subcontracted labor to the activity. This almost
always increases the cost of an activity unless the
subcontracted labor is for more efficient.

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King Saud University Dr. Khalid Al-Gahtani
 Project Costs Definitions

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King Saud University Dr. Khalid Al-Gahtani
Practices to Estimate the Project cost
Some company assigns Overhead office as % of
direct cost.
Most companies dont consider profit as a cost
of the job. Instead, analysis are completed by
using Direct costs + Indirect costs + Company
overhead vs. Budgeted (estimated costs).
Similar to each activity, the project as a whole
has an ideal (Lease expensive) Duration.

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 Accelerating the Critical and
Noncritical path

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Network Compression Algorithm
Determine Normal project duration, and
cost.
Identify Normal duration Critical Path.
For large network, using CRITICALITY
THEORM to eliminate the noncritical
paths that do not need to be crashed.
Compute the cost slop :
cost slope = crash cost - normal cost
normal duration- crash duration
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King Saud University Dr. Khalid Al-Gahtani
Network Compression Algorithm
shortening the CRITICAL ACTIVITIES
beginning with the activity having the
lowest cost-slope
Determine the compression limit (Nil)
- Crash Limit, or
Nil = Min - Free Float of any of the non critical activities
in the parallel paths competing for critical path.*

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King Saud University Dr. Khalid Al-Gahtani
Network Compression Algorithm
Organize the data as in the following table:
Cycle Activity Can Be
# to Shorten Shortened
Nil
Days Cost per Cost for Total Project
Shortened Day Cycle Cost Duration
0
1
2
3

Update the project network

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King Saud University Dr. Khalid Al-Gahtani
Network Compression Algorithm
When a new Critical path is formed:
Shorten the combination of activity which
Falls on Both Critical Paths, OR
Shorten one activity from each of the critical
paths. Use the combined cost of shortening
both activities when determining if it is cost
effective to shorten the project.
At each shortening cycle, compute the
new project duration and project cost
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King Saud University Dr. Khalid Al-Gahtani
 Network Compression Algorithm
Continue until no further shortening is possible
Tabulate and Plot the Indirect project Cost on
the same time-cost graph
Cycle Project Direct Indirect Total
# Duration Cost Cost Cost
0
1
2
3
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King Saud University Dr. Khalid Al-Gahtani
Network Compression Algorithm
Add direct and indirect cost to find the
project cost at each duration.
Use the total project cost-time curve to
find the optimum time.

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King Saud University Dr. Khalid Al-Gahtani
Example 1:
The durations and direct costs for each activity in the network of a small construction
contract under both normal and crash condition are givenin below Table. Establish the least
cost for expediting the contract
. Determine the optim um duration of the contract assuming the
indirect cost amounts to SR125/week.

Normal Crash
Activity Preceded by Duration Cost Duration Cost
(weeks) (SR) (weeks) (SR)
A 12 7000 10 7200
B A 8 5000 6 5300
C A 15 4000 12 4600
D B 23 5000 23 5000
E B 5 1000 4 1050
F C 5 3000 4 3300
G E,C 20 6000 15 6300
H F 13 2500 11 2580
I D, G, H 12 3000 10 3140
36,500 38470

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 20 23 43
D 4
24 4 47
0

0 12 12 12 8 20 20 5 25 27 20 47 47 12 59
A B E G I
0 0 12 14 2 22 22 2 27 27 0 47 47 0 59
2@100 2@150 1@50 5@60 2@70

2
12 15 27 27 5 32 32 13 45
F H ES D EF
C
29 2 34 34 2 47 Activity
12 0 27
3@200 1@300 2@40 LS F LF
Crash limit

Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0 36,500 59
1 G 5 2 2 60 120 36,620 57

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King Saud University Dr. Khalid Al-Gahtani
 20 23 43
D
22 2 45
0

0 12 12 12 8 20 20 5 25 27 18 45 45 12 57
A B E G I
0 0 12 14 2 22 22 2 27 27 0 45 45 0 55
2@100 2@150 1@50 3@60 2@70

12 15 27 27 5 32 32 13 45
ES D EF
C F H
Activity
12 0 27 27 0 32 32 0 45
3@200 1@300 2@40 LS F LF
Crash limit

Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0 36,500 59
1 G 5 2 2 60 120 36,620 57
2 I 2 - 2 70 140 36,760 55

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King Saud University Dr. Khalid Al-Gahtani
 20 23 43
D
22 2 45
0

0 12 12 12 8 20 20 5 25 27 18 45 45 10 55
A 0 B E G I
0 0 12 14 2 22 22 2 27 27 0 45 45 0 55
2@100 2@150 1@50 3@60 0

12 15 27 27 5 32 32 13 45
ES D EF
C F H
Activity
12 0 27 27 0 32 32 0 45
3@200 1@300 2@40 LS F LF
Crash limit

Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0 36,500 59
1 G 5 2 2 60 120 36,620 57
2 I 2 2 70 140 36,760 55
3 A 2 2 100 200 36,960 53
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 18 23 41
D 2
20 2 43
0

0 10 10 10 8 18 20 5 25 25 18 43 43 10 53
A B E G I
0 0 10 12 2 20 22 2 27 25 0 43 43 0 53
0 2@150 1@50 3@60 0

10 15 25 25 5 30 30 13 43
ES D EF
C F H
Activity
10 0 25 25 0 30 30 0 43
3@200 1@300 2@40 LS F LF
Crash limit
Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0 36,500 59
1 G 5 2 2 60 120 36,620 57
2 I 2 2 70 140 36,760 55
3 A 2 2 100 200 36,960 53
4 H, G 2 2 2 60+40 200 37,160 51
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King Saud University Dr. Khalid Al-Gahtani
 18 23 41
D
18 0 41
0

0 10 10 10 8 18 18 5 23 25 16 41 41 10 51
A B 0 E G I
0 0 10 10 0 18 20 2 25 25 0 41 41 0 51
0 2@150 1@50 1@60 0

10 15 25 25 5 30 30 11 41
ES D EF
C F H
Activity
10 0 25 25 0 30 30 0 41
3@200 1@300 0 LS F LF
Crash limit
Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0 36,500 59
1 G 5 2 2 60 120 36,620 57
2 I 2 2 70 140 36,760 55
3 A 2 2 100 200 36,960 53
4 G, H 2 2 2 60+40 200 37,160 51
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5 B, C
King Saud University 2 2 Al-Gahtani
Dr. Khalid 150+200 700 37,860 49
 16 23 39
D
16 0 39
0

0 10 10 10 6 16 16 5 21 23 16 39 39 10 49
A B E G I
0 0 10 10 0 16 18 2 23 23 0 39 39 0 49
0 0 1@50 1@60 0

10 13 23 23 5 28 28 11 39
ES D EF
C F H
Activity
10 0 23 23 0 28 28 0 39
1@200 1@300 0 LS F LF
Crash limit

Cycle Project Direct Indirect Total

# Duration Cost Cost Cost
0 59 36500 7375 43875
1 57 36620 7125 43745
2 55 36760 6875 43635
3 53 36960 6625 43585
4 51 37160 6375 43535
5 49 37860 6125 43985
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 Project Optimal Duration
50000
45000
40000
35000 Direct
Cost
Cost (SR)

30000
Indirect
25000
cost
20000 Total
15000 Cost

10000
5000
0
48 49 50 51 52 53 54 55 56 57 58 59 60
Project Duration (Week)

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Class Work #2
Data on small maintenance project is given as below:

Depends Normal Crash

Activity on Time Cost Time Cost
A 6 days $700 4 days $800
B 4 days 400 4 days 400
C 5 days 650 4 days 700
D A 8 days 625 5 days 700
E B 10 days 200 7 days 350
F B 7 days 500 5 days 700
G C 3 days 600 3 days 600
H D, E 6 days 300 5 days 400
I F, G 7 days 350 4 days 425

On completion, the project will give a return of $110/day. Using time-cost trade-off method,
how much would you like to compress the project for maximizing the return? Show all
calculations.

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King Saud University Dr. Khalid Al-Gahtani