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    Based on the information provided, the optimal crew size that provides the best time-cost tradeoff is a crew of 7 people.

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    CM Lecture 15

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    Based on the information provided, the optimal crew size that provides the best time-cost tradeoff is a crew of 7 people.

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    © All Rights Reserved
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    47 views19 pages

    Onstruction Anagement Ecture: Project Time-Cost Trade-Off

    Uploaded by

    Abdul Wahab
    Based on the information provided, the optimal crew size that provides the best time-cost tradeoff is a crew of 7 people.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 19

    CONSTRUCTION MANAGEMENT

    LECTURE 15

    PROJECT TIME-COST TRADE-OFF

    1
    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.)

     Time-related cost: costs spent along the activity duration


    (e.g., labor wages, equipment rental costs, etc.)

     Quantity-proportional cost: costs changes with the


    quantities (e.g., material cost)
    2
    CONSTRUCTION PROJECT COSTS (2)
    Total project costs = direct costs + indirect costs
    Project direct costs
     The costs and expenses that are incurred for a specific
    activity are termed direct costs.
     These costs are estimates based on detailed analysis of
    contract activities, the site conditions, resources
    productivity data, and the method of construction being
    used for each activity.
     Includes labor costs, material costs, equipment costs, and
    subcontractor costs.

    Project indirect costs


     Other costs such as the overhead costs.
     Part of the company’s indirect costs is allocated to each of
    the company's projects. The indirect costs always classified 3

    to: Project (site) overhead; and General (head-office)


    overhead.
    CONSTRUCTION PROJECT COSTS (3)
    Project overhead
     Site-related costs: cost of items that can not be directly
    charged to a specific work element (fixed or time-related).
     Costs of site utilities, supervisors, housing and feeding of
    project staff, parking facilities, offices, workshops, stores, and
    first aid facility.
     A detailed analysis of the particular elements of site-related
    costs is required to arrive at an accurate estimate.
     However, companies used to develop their own forms and
    checklists for estimating these costs.

     Sit overhead costs are estimated to be between 5% - 15%


    of project total direct cost.

    4
    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.)

     Generally, the general overhead for a specific contract can be


    estimated to be between 2% - 5% of the contract direct cost.

     The amount of the general overhead that should be allocated


    to a specific project equals:
     Project direct cost x general overhead of the company in a
    year/ expected sum of direct costs of all projects during the
    5
    year
    CONSTRUCTION PROJECT COSTS (5)
     When studying cash flow, it is very important to determine the
    actual dates when the expenditures (cost) will take place.
     At that time, the expenditures will renamed as the expenses.
     As shown in the figure, they are the same except the expenses
    are shifted (delayed) than the costs.

    6
    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.
    7
    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

    8
    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.

     This relationship between construction projects’ time and cost


    is called time cost trade-off decisions

     Time-cost trade-off decisions are complex and require selection


    of appropriate construction method for each project task.
    9
    TIME-COST TRADE-OFF (2)
     The objective of the time-cost trade-off analysis is to reduce
    the original project duration, determined from the critical path
    analysis, and to meet a specific deadline, with the least cost.
     In addition to that it might be necessary to finish the project in
    a specific time to:
     Recover early delays.
     Avoid liquidated damages.
     Free key resources early for other projects.
     Avoid adverse weather conditions that might affect
    productivity
    Liquidated damages:
     Receive an early completion-bonus.
    Amount decided during the
     Improve project cash flow formation of contract for the
    compensation of the late
    performance for the injured
    10
    party. It is a fixed stipulated
    sum of penalty by the
    contractor
    TIME-COST TRADE-OFF (3)
     Reducing project duration can be done by adjusting overlaps
    between activities or by reducing activities’ duration.
     What is the reason for an increase in direct cost as the
    activity duration is reduced?
     A simple case arises in the use of overtime work. By
    scheduling weekend or evening work, the completion time for
    an activity as measured in calendar days will be reduced.
    However, extra wages must be paid for such overtime work, so
    the cost will increase.
     Also, overtime work is more prone to accidents and quality
    problems that must be corrected, so costs may increase.
     The activity duration can be reduced by one of the following
    actions:
     Applying multiple-shifts work.
     Working extended hours (over time).
     Offering incentive payments to increase the productivity.
     Working on week ends and holidays.
     Using additional resources.
    11
     Using materials with faster installation methods.
     Using alternate construction methods or sequence.
    ACTIVITY TIME-COST RELATIONSHIP (1)
     In general, there is a trade-off between the time and the direct cost to
    complete an activity; the less expensive the resources, the larger
    duration they take to complete an activity.
     Shortening duration on an activity will normally increase its direct
    cost which comprises: the cost of labor, equipment, and material.
     It should never be assumed that the quantity of resources deployed
    and the task duration are inversely related. Thus one should never
    automatically assume that the work that can be done by one man in
    16 weeks can actually be done by 16 men in one week.
    Normal duration: against minimum cost
    Crash duration: against maximum cost
    Intermediate point: ideal or optimal trade-
    off between time and cost for this activity.
    Cost slope of the activity: slope of line

    12

    linear time/cost trade-off for an activity


    ACTIVITY TIME-COST RELATIONSHIP (2)
     The slope of this line can be calculated mathematically by
    knowing the coordinates of the normal and crash points.
     Cost slope = crash cost – normal cost / normal duration – crash
    duration

    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:

     Consider the following rates: Labor PKR 250/day;


    carpenter PKR 350/day; foreman PKR 440/day and
    scaffolding 160/day. Determine the direct cost of this
    activity considering different crews formation. 14
    SOLUTION TO EXAMPLE 2
     The duration for installing the metal scaffold can be
    determined by dividing the total quantity by the estimated
    daily production. The cost can be determined by summing
    up the daily cost of each crew and then multiply it by the
    duration of using that crew. The calculations are shown in
    the following table.

    Crew Duration Cost (PKR)


    size (days)
    5 50.6 (use 51) 51 x (1x160 + 2x250 + 2x350 + 1x440) = 91800
    6 41.2 (use 42) 42 x (2x160 + 3x250 + 2x350 + 1x440) = 92820
    7 36.5 (use 37) 37 x (2x160 + 3x250 + 3x350 + 1x440) = 94720

    15
    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
    16
    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)

    18
    QUESTIONS?

    19

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