Chapter 9 - Reducing project duration. The need for reducing the project duration occurs for many reasons such as imposed duration dates, time-to-market considerations, incentive contracts, key resource needs, high overhead costs, or simply unforeseen delays. This chapter presented a logical, formal process for assessing the implications of situations that involve shortening the project duration.
CHAPTER NINE Reducing Project Duration McGrawHill/Irwin Copyright © 2011 by The McGrawHill Companies, Inc. All rights reserved Where Where We We Are Are Now Now 9–2 Rationale Rationale for for Reducing Reducing Project Project Duration Duration • Time Is Money: Cost-Time Tradeoffs – Reducing the time of a critical activity usually incurs additional direct costs • Costtime solutions focus on reducing (crashing) activities on the critical path to shorten overall duration of the project – Reasons for imposed project duration dates: • Timetomarket pressures • Unforeseen delays • Incentive contracts (bonuses for early completion) • Imposed deadlines and contract commitments • Overhead and public goodwill costs • Pressure to move resources to other projects 9–3 Options Options for for Accelerating Accelerating Project Project Completion Completion • Resources Not Constrained • Resources Constrained – Adding resources – Fast-tracking – Outsourcing project work – Critical-chain – Scheduling overtime – Compromise quality – Reducing project scope – Establishing a core project team – Do it twice—fast and then correctly 9–4 Explanation Explanation of of Project Project Costs Costs • Project Indirect Costs – Costs that cannot be associated with any particular work package or project activity • Supervision, administration, consultants, and interest – Costs that vary (increase) with time • Reducing project time directly reduces indirect costs • Project Direct Costs – Normal costs that can be assigned directly to a specific work package or project activity • Labor, materials, equipment, and subcontractors – Crashing activities increases direct costs 9–5 Reducing Reducing Project Project Duration Duration to to Reduce Reduce Project Project Cost Cost Identifying Identifyingdirect directcosts coststo to reduce reduce project projecttime time Gather Gatherinformation informationabout aboutdirect directand andindirect indirect costs costsof ofspecific specificproject projectdurations durations Search Searchcritical criticalactivities activitiesfor forlowest lowestdirect-cost direct-cost activities to shorten project duration activities to shorten project duration Compute Computetotal totalcosts costsfor forspecific specificdurations durationsand and compare to benefits of reducing project time compare to benefits of reducing project time 9–6 Project Project Cost Cost–Duration –Duration Graph Graph 9–7 FIGURE 9.1 Constructing Constructing aa Project Project Cost Cost–Duration –Duration Graph Graph • Find total direct costs for selected project durations • Find total indirect costs for selected project durations • Sum direct and indirect costs for these selected project durations • Compare additional cost alternatives for benefits 9–8 Constructing Constructing aa Project Project Cost Cost––Duration Duration Graph Graph • Determining Activities to Shorten – Shorten the activities with the smallest increase in cost per unit of time – Assumptions: • The cost relationship is linear • Normal time assumes lowcost, efficient methods to complete the activity • Crash time represents a limit—the greatest time reduction possible under realistic conditions • Slope represents a constant cost per unit of time • All accelerations must occur within the normal and crash times 9–9 Activity Activity Graph Graph 9–10 FIGURE 9.2 Cost Cost–Duration –Duration Trade-off Trade-off Example Example 9–11 FIGURE 9.3 Cost Cost–Duration –Duration Trade-off Trade-off Example Example (cont’d) (cont’d) FIGURE 9.3 (cont’d) 9–12 Cost Cost–Duration –Duration Trade-off Trade-off Example Example (cont’d) (cont’d) 9–13 FIGURE 9.4 Cost Cost–Duration –Duration Trade-off Trade-off Example Example (cont’d) (cont’d) FIGURE 9.4 (cont’d) 9–14 Summary Summary Costs Costs by by Duration Duration 9–15 FIGURE 9.5 Project Project Cost Cost–Duration –Duration Graph Graph 9–16 FIGURE 9.6 Practical Practical Considerations Considerations • Using the Project Cost–Duration Graph • Crash Times • Linearity Assumption • Choice of Activities to Crash Revisited • Time Reduction Decisions and Sensitivity 9–17 What What ifif Cost, Cost, Not Not Time Time Is Is the the Issue? Issue? • Commonly Used Options for Cutting Costs – Reduce project scope – Have owner take on more responsibility – Outsourcing project activities or even the entire project – Brainstorming cost savings options 9–18 Key Key Terms Terms Crashing Crash point Crash time Direct costs Fast-tracking Indirect costs Outsourcing Project cost–duration graph 9–19 Project Project Priority Priority Matrix: Matrix: Whitbread Whitbread Project Project 9–20 FIGURE 9.6 ... of reducing project time compare to benefits of reducing project time 9 6 Project Project Cost Cost–Duration –Duration Graph Graph 9 7 FIGURE 9. 1 Constructing Constructing aa Project Project Cost... All accelerations must occur within the normal and crash times 9 9 Activity Activity Graph Graph 9 10 FIGURE 9. 2 Cost Cost–Duration –Duration Trade-off Trade-off Example Example 9 11 FIGURE 9. 3 Cost Cost–Duration... Fast-tracking Indirect costs Outsourcing Project cost–duration graph 9 19 Project Project Priority Priority Matrix: Matrix: Whitbread Whitbread Project Project 9 20 FIGURE 9. 6