Time Cost Optimisation Tutorial

Question 1
The contractor was awarded a contract to build a block of high-rise apartments. The
contract contains a direct cost of $7140k and an indirect cost $40k per week. Since
the client is a new developer with a strategy to invest in more construction projects
over the next ten years, the contractor is aware of the need to perform well in order to
secure more work from his client in the future. The project schedule is shown in
Figure 1. Assuming only five activities that are capable of being crashed (Table 1),
determinate the following
(1) The project Critical Path.
(2) The normal completion time and the total normal cost.
(3) The minimum project duration.
(4) The total project cost associated with the minimum project duration.
(5) The optimum completion time associated with the least total project cost.
(6) The minimum total cost.

Figure 1
Table 1
Activity
B
C
D
G
I

Normal Time
11
5
8
11
10

Crash Time
9
3
6
7
8

Cost Slope ($k/week)

35
45
40
30
110

Question 1 solution
Activity Normal Time
B
C
D
G
I

11
5
8
11
10

Crash Time
9
3
6
7
8

Cost Slope
($k/week)
35
45
40
30
110

Potential
crash (week)
2
2
2
4
2

The normal completion time and the total normal cost.

The normal completion time = 48 weeks.
Direct cost = $7140k
Indirect cost = 40x48= $1920k
Total normal cost = 7140+1920=$9060k
Time-Cost Trade-Off rules
1. List activities on the present critical path
2. Delete those impossible to "crash"
3. Select those with the lowest cost slope
4. Maximum amount of crash (This activity only)
5. Does the network limit the crash
6. Compute new project duration & direct costs
Crash Activity G (lowest cost slope) (cost slope=$30k/week, potential crash week
= 4)
Does the network limit the crash? Yes. (C-D-F becomes critical if G is crashed by
more than 3 weeks)

Project duration
(week)
48

Direct cost
($k)
7140

Indirect cost
($k)
1920

Total cost
($k)
9060

47
46
45

7140+30=7170
7170+30=7200
7200+30=7230

1920-40=1880
1880-40=1840
1840-40=1800

9050
9040
9030

Comments
Normal time
Crash G 1 week
Crash G 1 week
Crash G 1 week

Crash Activity C (cost slope=$45k/week (the cheapest now), potential crash week
= 2)
Does the network limit the crash? Yes. (A-B-E-H becomes critical if C is crashed by
more than 1 week)

Project duration
(week)
48

Direct cost
($k)
7140

Indirect cost
($k)
1920

Total cost
($k)
9060

47
46
45
44

7140+30=7170
7170+30=7200
7200+30=7230
7230+45=7275

1920-40=1880
1880-40=1840
1840-40=1800
1800-40=1760

9050
9040
9030
9035

Comments
Normal time
Crash G 1 week
Crash G 1 week
Crash G 1 week
Crash C 1 week

The following activities are still available for compression

Activities B and C by one week at $80k per week (the cheapest alternative)
Activities B, D and G by one week at $105k per week
Activity I by two weeks at $110k per week
Crash activities B and C together by one week at $80k per week (the cheapest
alternative)

Project duration
(week)
48

Direct cost
($k)
7140

Indirect cost
($k)
1920

Total cost
($k)
9060

47
46
45
44
43

7140+30=7170
7170+30=7200
7200+30=7230
7230+45=7275
7275+(35+45)
=7355

1920-40=1880
1880-40=1840
1840-40=1800
1800-40=1760
1760-40=1720

9050
9040
9030
9035
9075

Comments
Normal time
Crash G 1 week
Crash G 1 week
Crash G 1 week
Crash C 1 week
Crash B & C 1
week

Crash activities B, D and G by one week at $105k per week

Project duration
(week)
48

Direct cost
($k)
7140

Indirect cost
($k)
1920

Total cost
($k)
9060

47
46
45
44
43

7140+30=7170
7170+30=7200
7200+30=7230
7230+45=7275
7275+(35+45)
=7355
7355+(35+40+30)
=7460

1920-40=1880
1880-40=1840
1840-40=1800
1800-40=1760
1760-40=1720

9050
9040
9030
9035
9075

1720-40=1680

9140

42

Comments
Normal time
Crash G 1 week
Crash G 1 week
Crash G 1 week
Crash C 1 week
Crash B & C 1
week
Crash B, D &
G 1 week

Activity I by two weeks at $110k per week

Project duration
(week)
48

Direct cost
($k)
7140

Indirect cost
($k)
1920

Total cost
($k)
9060

47
46
45
44
43

7140+30=7170
7170+30=7200
7200+30=7230
7230+45=7275
7275+(35+45)
=7355
7355+(35+40+30)
=7460
7460+110=7570
7570+110=7680

1920-40=1880
1880-40=1840
1840-40=1800
1800-40=1760
1760-40=1720

9050
9040
9030
9035
9075

1720-40=1680

9140

1680-40=1640
1640-40=1600

9210
9280

42
41
40

Comments
Normal time
Crash G 1 week
Crash G 1 week
Crash G 1 week
Crash C 1 week
Crash B & C 1
week
Crash B, D & G
1 week
Crash I 1 week
Crash I 1 week

The minimum project duration = 40 weeks

The total project cost associated with the minimum project duration = $9280k
The optimum completion time associated with the least total project cost
= 45 weeks
The minimum total cost for this project = $9030k.