# Time – Cost Tradeoff Analysis by malj

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```									(project Crashing)
   Time/cost trade-off analysis is the
compression of the project schedule to
achieve a more favorable outcome in terms
of project duration, cost, and projected
revenues
   Objectives of time/cost trade-off analysis
◦ Minimize total project costs
◦ Compress project to an acceptable duration
   Done by selectively crashing specific
activities to shorten project duration
   You might think that total project costs
will increase when we begin to crash
activities
   But, total project costs consist of both
indirect (project-based) costs (PBC) and
activity-based costs (ABC)
◦ ABC goes up when we crash activities in an
effort to finish the project early
◦ But, PBC (the indirect costs) goes down if we
finish the project early
   Any activity that is on the critical path
   Activities with relatively long durations
   Bottleneck activities (that appear on
multiple critical paths)
   Activities that relatively low cost 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
1.   Estimate project-based (indirect) cost per unit
time
2.   Identify critical activities that are good
candidates for crashing
3.   Determine activity-based (direct) cost of
crashing selected activities vs. indirect cost
savings
4.   Calculate crash cost per period = (crash cost –
normal cost)/(Normal time – crash time)
5.   Select activities with minimum crash cost per
period to be crashed
6.   Recalculate the forward pass and check for
changes in critical path
   Reduced flexibility and less margin for error
 increased risk of failure to complete
project on time
   Raises potential for poor quality
   Increases potential for staff burnout, stress,
and turnover
   Raises activity-based costs
   May negatively affect other projects
   Crashing
◦ reducing project time by expending additional
resources
   Crash time
◦ an amount of time an activity is reduced
   Crash cost
◦ cost of reducing activity time
   Goal
◦ reduce project duration at minimum cost

7
Crash
cost       Crashing activity

Slope = crash cost per unit time

Normal Activity
Normal
cost
Normal
time

Crash                                 Activity time
time
8
   Crashing costs increase as project duration decreases
   Indirect costs increase as project duration increases
   Reduce project length as long as crashing costs are less than indirect
costs

Min total cost =        Total project cost
optimal project
time                            Indirect cost

Direct cost

time
9
   The network and durations given below shows the normal
schedule for a project.
   You can decrease (crash) the durations at an additional
expense.
   The Table given below summarizes the time-cost
information for the activities.
   The owner wants you to you to finish the project in 110
days.
   Find the minimum possible cost for the project if you want
to finish it on 110 days. (Assume that for each activity there
is a single linear, continuous function between the crash
duration and normal duration points).
2       4
12
8
7
1                                  4
12

3             6
4   5         4
4

darla/smbs/vit       21
Activity Normal   Normal    Crash   Crash     Allowable    slope
time     cost Rs   time    cost Rs   crash time
1        12       3000      7       5000      5            400
2        8        2000      5       3500      3            500
3        4        4000      3       7000      1            3000
4        12       50000     9       71000     3            7000
5        4        500       1       1100      3            200
6        4        500       1       1100      3            200
7        4        1500      3       22000     1            7000
75000             110700

22
R500              R7000                       Project duration = 36
2                  4
8                 12                R700
7         From…..
1                                                   4
12

R400           3                              6
4             5                4
4               R200
R3000
R200

R500               R7000

2                  4
8                 12             R700
To…..                                                                7
1                                                    4
7
Project
R400               3                         6
duration = 31                                           5             4
4