Rationale for Reducing Project Duration by mpm74462

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									CHAPTER 9 – REDUCING PROJECT                            Rationale for Reducing Project
DURATION                                                Duration
 OBJECTIVES                                              Time Is Money: Cost-Time Tradeoffs
    To recognise that compression costs additional         Reducing the time of a critical activity usually incurs
    money                                                  additional direct costs.
    To demonstrate an understanding of the problems           Cost-time solutions focus on reducing (crashing) activities
                                                              on the critical path to shorten overall duration of the
    with imposed project durations                            project.
    To understand the real costs of crashing projects      Reasons for imposed project duration dates:
    To understand the risks associated with                   Customer requirements and contract commitments
    compressing or crashing a project                         Time-to-market pressures
    To recognised when a project manager should try           Incentive contracts (bonuses for early completion)
    for the optimum cost-duration                             Unforeseen delays
                                                              Overhead and goodwill costs
                                                              Pressure to move resources to other projects

Options for Accelerating Project
Completion                                              Explanation of Project Costs
 Add resources                                                                                Indirect Costs:
                                                                                                 overhead costs (admin,
 Outsourcing                                                                                     marketing etc)
 Overtime                                                                                        Don’t apply to a specific
                                                                                                 work package
 Dedicated project teams                                                                         Vary directly with time
 Provide short-term interim solutions                                                         Direct Costs:
 Fast track by doing activities in parallel                                                      Assigned to a w/p –
                                                                                                 represent normal costs
 Critical-Chain                                                                                  (low cost, efficient
                                                                                                 methods for normal time)
 Reducing Project Scope                                                                          Costs for an imposed
                                                                                                 duration will be
 Compromise Quality                                                                              higher(therefore reducing
                                                                                                 time will increase costs
                                                                                                 Sum of all w/p’s will
                                                                                                 equate to total direct cost
                                                                                                 for the project

                                                        Constructing a project duration
[Think about it]                                        graph
                                                         Find total direct costs for selected project
  Identify five indirect costs you might                 durations.
  find on a moderately complex project.                  Find total indirect costs for selected
                                                         project durations.
  Why are these costs classified as
  indirect?                                              Sum direct and indirect costs for these
                                                         selected project durations.
                                                         Compare additional cost alternatives for
  How can a cost-duration graph be used                  benefits.
  by the project manager? Explain.

                              Constructing a project
Activity Graph                duration graph
                               Slope = (crash cost – normal cost)/ (normal
                               time – crash time)
                               See example

                              Cost-time trade-off example
Cost-time trade-off example   (contd.)

Cost-time trade-off example   Cost-time trade-off example
(contd.)                      (contd.)

Practical Considerations                                              Practical Considerations
 Using the Cost-Duration Graph:
     Best to create during preproject planning phase
                                                                       Time Reduction Sensitivities:
     Not desirable to create after imposition of a project duration      Reducing project time from normal towards
     time                                                                optimal depends on the sensitivity of the
     Least desirable to create after the project has started             network
 Linearity Assumption:
     Works best for most projects even though accuracy of                Sensitive networks have several critical or
     compressed activity times and costs is questionable                 near-critical paths, and reducing normal
 Crashing Activities                                                     time results in slack reduction which
     Timing is crucial (crashing too early might result in money         increases risk of delaying the project
     Crashing might have an impact on morale of team                     Insensitive networks have one dominant
     Look at risk of crashing certain activities                         critical path – have the biggest potential for
                                                                         real savings

Options for Crashing Project
Activities                                                            If Cost Reduction is the Issue?
 When resources aren’t constrained:                                    Commonly Used Options for
    Adding Resources (up to a point beyond
    which communication costs are increased,
                                                                       Cutting Costs
    and productivity decreases)                                          Reduce project scope
    Outsourcing project work                                             Have owner take more
    Scheduling overtime (restricted by the BCEA                          responsibility
    to no more than 10 hours per week)
    Establishing a core project team (avoids                             Outsource
    multitasking)                                                        Brainstorm options
    Do it twice – fast and correctly

Key terms
 Crash point
 Crash time
 Direct costs
 Indirect costs
 Phase project delivery
 Project cost–duration graph


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