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Onstruction Anagement Ecture: Project Time-Cost Trade-Off
Onstruction Anagement Ecture: Project Time-Cost Trade-Off
LECTURE 15
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CONSTRUCTION PROJECT COSTS (1)
The principal components of a contractor's costs and expenses
result from the use of labors, materials, equipment, and
subcontractors.
Additional general overhead cost components include taxes,
premiums on bonds and insurance, and interest on loans.
Fixed cost: costs that spent once at specific point of time (e.g.,
the cost of purchasing equipment, etc.)
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CONSTRUCTION PROJECT COSTS (4)
General overhead
Costs that cannot be directly attributed to a specific project
called general overhead.
These are the costs that used to support the overall company
activities. (cost of the head-office expenses, mangers, directors,
design engineers, schedulers, etc.)
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EXAMPLE 1
Consider the construction of 8-week foundation
activity with operation cost of PKR 8800.
The operational cost is broken down into the following
elements:
Labor PKR1600 paid weekly
Plant PKR 4000 paid weekly after 4 weeks credit facility
Materials PKR 800 paid weekly after 5 weeks credit
facility
Subcontractors PKR 2400 paid weekly after 3 weeks credit
facility
Determine the expenses (cash out) of this activity.
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SOLUTION TO EXAMPLE 1
A time-scaled plan is developed for this activity for the
payments for labor, plant, material, and subcontractors. The cot
will be plotted weekly with the delay specified
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TIME-COST TRADE-OFF (1)
Activity durations depends upon the type and amount of
resources.
Assigning more workers to a particular activity will normally
result in a shorter duration.
Greater speed may result in higher costs and lower quality
Need to consider impacts of time and cost trade-offs.
Reducing both projects’ cost and time is critical.
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Illustration of non-linear 13
time/cost trade-off for an activity
EXAMPLE 2
A subcontractor has the task of erecting 8400 square meter
of metal scaffolds. The contractor can use several crews
with various costs. It is expected that the production will
vary with the crew size as given below:
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SOLUTION TO EXAMPLE 2
This example illustrates the options which the planner
develops as he/she establishes the normal duration for an
activity by choosing the least cost alternative. The time-cost
relationship for this example is shown in Figure. The cost slop
for this activity can be calculates as follow:
Cost slope 1 (between points 1 and 2) = (92820 – 91800) / (51 –
42) = 113.33 PKR/day
Cost slope 2 (between points 2 and 3) = (94720 – 92820) / (42
– 37) = 380 PKR/day
95000
3
94000
93000
2
92000 1
91000
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35 40 45 50 55
Time-cost relationship
PROJECT TIME-COST RELATIONSHIP (1)
If each activity was scheduled for the duration that
resulted in the minimum direct cost, the time to complete
the entire project might be too long.
Thus, planners perform what is called time-cost trade-off
analysis to shorten the project duration.
This can be done by selecting some activities on the critical
path to shorten their duration.
As the direct cost for the project equals the sum of the
direct costs of its activities, then the project direct cost will
increase by decreasing its duration.
Indirect cost will decrease by decreasing the project
duration, as the indirect cost are almost a linear function
with the project duration.
The optimum project duration can be determined as the
project duration that results in the least project total cost. 17
PROJECT TIME-COST RELATIONSHIP (2)
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QUESTIONS?
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