MODULE 1: CONTRACTS AND SPECIFICATIONS PRICE – BASED CONTRACTS

CONTRACT 1. Lump- Sum Contract

A construction contract provides a written legal  Contractor agrees to perform job of work for a
binding agreement, for both the owner and the fixed sum of money.
builder, that the executed job will receive the specific  The contractor is responsible for preparing the Bill
amount of compensation or how the compensation of Quantities
will be distributed. 2. Unit Price Contract
- If you are starting as a small contructor always  Items of work of the contract are specified with
start with a downpayment estimated quantities in the Bill of Quantities
 The client or owner pays a fixed sum for each
CONSTRUCTION CONTRACT DOCUMENTATION completed unit of work.
 Agreement 3. Schedule of Rates Contract
 General Conditions  Schedule of the work items without quantities is
 Supplementary Conditions prepared by the owner and to be rated by the
 Drawings – as built, bidding drawing and contractor.
drawings approved by the owner  Used for repair and maintenance works or under
 Specifications – specification in materials conditions of urgency.
like in AASHTO, ASTM, etc.
 Addenda issued before submittal COST REIMBURSEMENT CON
 Notice to proceed Overhead And Profit
 Performance and Payment Bonds  The contractor will be reimbursed for all the
 Change Orders or Contract Modification actual costs plus an agreed fee to cover his
services
AGREEMENT 1. Cost Plus Percentage Of Cost
The document that formalizes the construction  The contractor is reimbursed for all his costs with
contract and is the basic contract. a fixed percentage of cost to cover his services.
GENERAL CONDITIONS - total price times 35% (which is sa engineer na)
The portion of the contract document in which the 2. Cost Plus Fixed Fee
rights and responsibilities of the involved parties are  The owner pays all costs of construction
itemized with a fixed sum of money.
SUPPLEMENTARY CONDITION  The fee is fixed and does not fluctuate with
A portion of a contract documents that supplements, the actual cost of the project.
modifies, changes, adds to, or delete from provisions 3. Target Cost with Variable Fees
stated in the general conditions.  The contractor and owner agree to a target
- Dito nalabas yung additional ni owner and estimate of construction.
contractor and yung mga hindi nakikitang  Bons or penalty arrangements are tied to this
drawing na dinagdag target figure.
DRAWINGS 4. Guaranteed Maximum Price
The actual plans from which the project is to be built.  The contractor guarantees that he will construct
1. For bidding the project in full accordance with the drawings
2. For construction and specifications.
3. As-built – drawing pagkatapos natin gawin  The price to the owner will not exceed some total
yung inask natin sa owner upset price.

ADDENDA CONSTRUCTION SPECIFICATIONS

The document that modifies the basic contract  The word specification is defined as "to state
documents after it has been issued to the bidder, but explicitly or in detail" or "to be specific“
prior to the taking of bids  Refers to technical standards, which may be
TYPES OF CONSTRUCTION CONTRACTS developed by any of various kinds of organizations
 Price Given in Advance Contracts (Price-based like ASTM, AASHTO, OSHA and etc.
Contracts) – used by small owners
 Cost Reimbursement Contracts (Cost-based
Contracts) – used by minor contractor kasi usually
they have capital and tsaka na mag-bidding
TYPES OF SPECIFICATIONS STAFFING - deals with the recruitment and
1. Performance Specifications development of competent employees through a
 specifies the operational requirements of a process of evaluation, selection, placement and
component or installation. human resource development (includes, setting up of
 tells the contractor what the final installed training programs and benefit scheme).
product must be capable of doing.
2. Prescriptive Specifications Project Organizational and Staffing
Convey the requirements of a project through a  is the part where organization structure,
detailed explanation of the materials that the individual positions and functions are developed,
contractor must use, and the means of installing duties and responsibilities are defined, teams are
those materials. formed and training programs are formulated.
 General: This section will typically contain
references to national/international standards, ORGANIZATION STRUCTURE
design requirements, a list of required submittals Organizational Structure is developed on certain
from the contractor to the architect/engineer, parameters, such as:
quality control requirements and product  Determination and grouping of activities
handling requirements.  Assigning of activities to departments
 Products: This section will describe, in detail, the  Decisions and actions defining hierarchy of
various products required for the task covered by relationships among the departments
the specification along with the individual  Divisions and sections;
structural and performance requirements of each  And providing coordination lines among peoples
product. and tasks
 Execution: This section will explain how to
prepare the materials and conduct the In actual construction practice, organization structure
installation, including the testing requirements to are group either:
be followed.  By Skill (masonry, carpentry, plumbing steelworks
3. Proprietary Specifications and equipment)
 are those that require the use of a single  By Discipline (civil, electrical, sanitary, mechanical
approved product type for any particular and architectural)
installation.  By Gang or Clusters of workers usually headed by
 are often used in cases where there is existing a foreman.
equipment or installations already on site. In
these cases the owner may want to maintain STRUCTURE ELEMENTS OF AN ORGANIZATION
consistency of materials or possibly simply prefers 1. MEN – the different members of the organization
a specific type of product. (manpower)
2. MATERIALS – represents the materials necessary
MODULE 2: CONSTRUCTION PROJECT in the attainment (steel and sand)
ORGANIZATION 3. MACHINE – tools necessary in producing its
PROJECT - is plan or an undertaking composed of desired output (heavy equipment)
collective tasks and activities such as planning, 4. METHODS – the procedures and ways used in the
financing, designing, constructing and managing course of its actions
operations to achieve particular objective. 5. MONEY – the financial resources of the
organization
CONSTRUCTION PROJECT - is an endeavor having a
defined beginning and end, undertaking to meet ORGANIZATION STRUCTURE
specific goals and objectives. 1. ORGANIZATION STRUCTURE “A” LARGE PROJECTS

PROJECT ORGANIZATION AND STAFFING

ORGANIZATION - A group of individuals which are
cooperating willingly and effectively for a common
goal
2. ORGANIZATION STRUCTURE “B” SMALL PROJECTS 3. Responsible for the technical performance &
successful completion of the project.
4. Engineer project expenses are within budget
5. Conduct periodic coordination meetings
6. Administer periodic evaluation of project
activities and the productivity of the project
participants
7. Carry out responsibilities for the preparing the
procedure for the turnover of the project when
3. ORGANIZATION STRUCTURE “C” completed
INTERRELATIONSHIPS AMONG PROJECT
PARTICIPANTS B. Functional Chart For Large Projects “ B “ HR
1. Recruit, select, hire, place complement workers
2. Handle timekeeping
3. Monitor attendance, tardiness and absences
4. Update personnel records
5. responsible for security services and
management
6. Secure necessary licenses and permits
7. Provide messenger services
POSITION CHART
 Pertains to the staffing of the organization. It C. Functional Chart For Large Projects “ C “ FINANCE
shows the type and number of persons needed in DEPARTMENT
each of the departments, divisions, and sections 1. Design and adopt appropriate accounting
1. POSITION CHART “A” LARGE PROJECTS procedures and standards
2. Records all financial transactions
3. Summarize the “Book” on a monthly, quarterly
and annual basis
4. Responsibilities for payroll services
5. Undertake Billing and Collection
6. Issue Receipts of Payments
7. Responsible for timely payments of SSS, Pag-ibig
2. POSITION CHART “B” SMALL PROJECTS and Philhealth dues

D. Functional Chart For Large Projects “ D “

PROCUREMENT TEAM
1. Responsible for procurement of construction
materials, supplies, equipment, etc.
2. Handle property and supply management
including inventory of materials, equipment,
FUNCTIONAL CHART
vehicles, tools and other properties of the
 Defines in words and statements the tasks and
company
responsibilities of the departments, divisions and
sections.
E. Functional Chart For Large Projects “ E “
1. Responsible for Technical Operations including
FUNCTIONAL CHART LARGE PROJECTS
field investigation, surveys and project
management services depending on the
specialization like: civil works, architecture,
sanitary, plumbing, electrical works and
mechanical works.
2. Undertake the actual physical execution of works
called for in the project.
A. Functional Chart For Large Projects “ A “ Project
Manager
1. Manage day-to-day activities
2. Provide overall direction
F. Functional Chart For Large Projects “ F “ SUB- Module 3: Planning and Scheduling
CONTRACTORS Planning and Scheduling is the first stage in the
Depending on the assigned tasks, responsibilities in Construction Management cycle. This is the part
implementing and commissioning certain jobs called when the blue-print of the project is being formed.
for in project.
Project Planning is a means by which all the various
G. Functional Chart For Large Projects “ G “ SPECIALTY activities involved in project implementation are
CONTRACTORS properly synchronized for optimum production and
Normally, specialty contractors (e.g., plumbing, glass productivity.
woks, air conditioning, elevator installation) perform
tasks that require skills not commonly available. Thus, Construction is recognized as the most unique due to
specialty contractors handle the installation, testing its highly volatile and unpredictable nature. For this
and commissioning of air conditioning units, reason, effective management begins with the
elevators, glass works (cladding), and the like. proper planning of the project that necessitates
integrated, concerted, and coordinated efforts of all
FUNCTIONAL CHART FOR SMALL PROJECTS project participants.

Things to produce in Planning and Scheduling

 Project site analysis;
 Planning with reference to materials, equipment,
manpower, site conditions, and laws/regulations;
 Construction methods;
 Table of activities;
 Bar charts;
 PERT/CPM;
TRAINING  Bill of materials and project cost analysis;
 Is a process of acquiring and enhancing skills,  Manning schedules;
knowledge, attitudes, and behaviors necessary  Equipment schedule;
for the trainees to effectively and efficient
 Logbooks;
perform their tasks better.
 Crashing project schedules
TYPICAL OBJECTIVES OF TRAINING
Project Site Analysis
 To orient new recruits or workers
Activities to be determined and analyzed in the site:
 To ensure that the project engineers and workers
 Determination and analyses of boundaries;
know exactly their tasks
 Elevation;
 To improve skills, productivity, job performance
 Topography;
and aptitude based on acceptable standards.
 Location of bunkhouses or temporary quarters;
Security and traffic situation;
DIRECTION AND SUPERVISION
 Local labor;
 Supervisors (middle-level managers) chiefly
 Availability of utilities;
perform the tasks of communicating with people
under him, giving instruction occasionally,  Sources of construction materials
motivating the people to work productively and
safely, and leading team members toward Table of Activities
working harmoniously to attain preset objectives In the Table of Activities or Work Plan the most
and targets. important project activities must be listed and
tabulated to established independence among
 supervisors should visit the project site regularly
activities and create a new reliable timeline.
and determine if the output of the people are
aligned with the work plan within quality
The Table of Activities are usually done in computer
standards
software, the most common software used by
construction companies are the Microsoft Project and
PRIMAVERA.
 One basic difference between PERT and CPM is the
multi-time estimate used by the former and the
single time estimates used by latter. In the
intervening years, this difference has disappeared
and these two have become like “two sides of the
same coin”.

The common advantage in the use of CPM for

construction projects are the following:
 Provides a mean to predict with reasonable
accuracy the time required for overall project
completion.
 Makes possible the identification of means for the
expedient execution of activities which is crucial
to timely project.
 Serves as guide for expediting the project when
completion date must be advanced;
Bar Chart  Provides a basis for the scheduling of
The Bar Chart has the distinct character of being subcontractors and material deliveries to the
easily understood by non-technical people. However,  jobsite.
its simplicity becomes its weakness as a control tool  Serve as basis for a balanced scheduling of
because it lacks the detailed breakdown of the manpower and construction equipment on the
different activities particularly their proper project.
sequencing and operational dependencies. This bullt-  Makes possible the rapid evaluation of
in weakness prevents the Bar Chart from being a fully  Serves as a convenient vehicle for progress
effective updating instrument. reporting and delays in schedules.
 It affords a basis for evaluating the effects of time
on construction changes and delays in schedules.

Project managers rely on PERT/CPM to help them

answer questions such as:
 What is the total time to complete the project?
 What are the scheduled start and finish dates for
PERT/CMP PRINCIPLES
each specific activity? Which activities are
Both Programs Evaluation and Review Technique
critical?
(PERT) and Critical Path Method (CPM) have almost
 Must it be completed exactly as scheduled to
simultaneously evolved in the late 1950’s, although
keep the project on schedule?
independently formulated.
 How long can non-critical activities be delayed
before they cause an increase in the project
Similarities in both techniques are found in the
completion time?
following: detailed breakdown of activities presented
through a network diagram indicating their
Example pf PERT
sequential order or relationships to one another, use
of arrows to represent network lines and events and
use of network nodes that represent the points in the
time at which activities may be started or due for
completion, and presence of estimates for time
duration and schedules for each activity.

In the completion of the time estimate for every

activity, critical activities that must meet the
schedules are predetermined. This ensures
completion of said activities and those others that are
dependent upon them. The same goes for activities
which require extra time (slack time for PERT & float
time for CPM) to undertake.
S-CURVE LINE Project Management
An S-curve represents the actual work How is it different?
accomplishment as against the work schedules,  Limited time frame
visually identified with a sloping line originating from  Narrow focus, specific objectives
the bottom left zero percent (0%) accomplishing  Less bureaucratic
going up to the upper right, 100% accomplishment. Why is it used?
 Special needs
An “S-Curve” is often used when forecasting the  Pressures for new or improves products or
construction component of a development feasibility. services
An S-Curve is a chart showing construction cash flows What are the Key Metrics
over a “standard” project's life. The graph plots the  Time
percentage of value of work completed against the  Cost
percentage of time completed in small increments.  Performance objectives
What are the Key Success Factors?
Looking at the S-Curve-line the reader can readily see  Top-down commitment
the project status at a given time whether it is ahead
 Having a capable project manager
of or behind schedule. An updated S-curve
 Having time to plan
immediately presents the positive and negative
 Careful tracking and control
variance of accomplishment and as such the timely
 Good communications
remedial measures can be applied. This makes the S-
curve such a widely used management reporting tool.
What are the Major Administrative Issues?
Executive responsibilities
 Project selection
 Project manager selection
 Organizational structure
Organizational alternatives
 Manage within functional unit
 Assign a coordinator
CRASHING PROJECT SCHEDULE PRINCIPLES
 Use a matrix organization with a project
Project schedules are developed based on normal
leader
conditions. However, if there is a need to expedite
What are the tools?
project completion of catch up with schedule,
“crashing” the project schedule is usually done.  Work breakdown structure
 Network diagram
Crashing can be done by adding manpower or  Gantt charts
increasing normal work operating time to a desired  Risk management
level. This also means raising the frequency of
procurement of materials and increasing the Planning and Scheduling
utilization of equipment.

CONTINUATION OF MODULE 3: PERT 1-2

Projects

Key Decisions
 Deciding which projects to implement
 Selecting a project manager
 Selecting a project team
 Planning and designing the project
Unique, one-time operations designed to accomplish  Managing and controlling project resources
a specific set of objectives in a limited time frame.  Deciding if and when a project should be
terminated
Project Manager Responsible for: Project Network – Activity on Arrow
 Work
 Quality
 Human Resources
 Time
 Communications
 Costs
Ethical Issues
 Temptation to understate costs
 Withhold information
Project Network – Activity on Node
 Misleading status reports
 Falsifying records
 Comprising workers’ safety
 Approving substandard work
Project Life Cycle

Network Conventions

Work Breakdown Structure

Time Estimates
PERT and CPM  Deterministic - Time estimates that are fairly
PERT: Program Evaluation and Review Technique certain
CPM: Critical Path Method  Probabilistic - Estimates of times that allow
 Graphically displays project activities for variation
 Estimates how long the project will take
 Indicates most critical activities Example 1
 Show where delays will not affect project
The Network Diagram
 Network (precedence) diagram – diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
 Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
 Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
 Activities – steps in the project that consume
resources and/or time. Example 1 Solution
 Events – the starting and finishing of activities,
designated by nodes in the AOA convention.
 Path - Sequence of activities that leads from the
starting node to the finishing node
 Critical path - The longest path; determines
expected project duration
 Critical activities - Activities on the critical path
 Slack - Allowable slippage for path; the difference
the length of path and the length of critical path
Computing Algorithm Example 5 Time Estimates
1. Network activities
 ES: early start
 EF: early finish
 LS: late start
 LF: late finish
2. Used to determine
 Expected project duration
 Slack time
 Critical path
Path Probabilities
Probabilistic Time Estimates
 Optimistic time - Time required under
optimal conditions
 Pessimistic time - Time required under worst Z indicates how many standard deviations of the path
conditions distribution the specified tine is beyond the expected
 Most likely time - Most probable length of path duration.
time that will be required
Probabilistic Estimates Example 6

Expected Time

Time-cost Trade-offs: Crashing

Crash – shortening activity duration
 Procedure for crashing
- Crash the project one period at a time
- Only an activity on the critical path
- Crash the least expensive activity
- Multiple critical paths: find the sum of
Variance crashing the least expensive activity on
each critical path

Time-Cost Trade-Offs: Crashing

Example 5
Advantages of PERT Summary
 Forces managers to organize  Projects are a unique set of activities
 Provides graphic display of activities  Projects go through life cycles
 Identifies  PERT and CPM are two common techniques
- Critical activities  Network diagrams
- Slack activities  Project management software available

Limitations of PERT Continuation of Module 3

 Important activities may be omitted PERT 3
 Precedence relationships may not be correct Project Management
 Estimates may include a fudge factor  Managers have been planning, scheduling,
 May focus solely on critical path monitoring, and controlling large scale projects
for hundred years, but it has only been in the last
Goldratt’s Critical Chain 50 years that management science techniques
Goldratt’s insight on project management have been applied to major projects.
 Time estimates are often pessimistic  In 1957, the Critical Path Method (CPM) was
 Activities finished ahead of schedule often developed by Kelly and Walker to assist in
go unreported building and maintenance of chemical plants.
 With multiple projects, resources needed  In 1958, the special projects office of the US navy
for one project may be in use on another developed the Program Evaluation and Review
 Technique (PERT) to plan and control the Polaris
Project Management Software missile program.
 Computer aided design (CAD)  In the recent time, PERT and CPM are two popular
 Groupware (Lotus Notes) management science techniques that help
 CA Super Project mangers plan, schedule, monitor, and control
 Harvard Total Manager large scale and complex projects
 MS Project
 Sure Track Project Manager PERT/CPM
 Time Line  PERT stands for Program Evaluation and Review
Advantages of PM Software Technique.
 Imposes a methodology  CPM stands for Critical Path Method.
 Provides logical planning structure  PERT/CPM is used to plan the scheduling of
 Enhances team communication individual activities that make up a project.
 Flag constraint violations  PERT/CPM can be used to determine the
earliest/latest start and finish times for each
 Automatic report formats
activity, the entire project completion time and
 Multiple levels of reports
the slack time for each activity.
 Enables what-if scenarios
 PERT and CPM are similar in their basic approach,
 Generates various chart types
they do differ in the way activity times are
estimated.
Project Risk Management
 For each PERT activity three times (optimistic,
Risk: occurrence of events that have undesirable
pessimistic and most likely times) are combined to
consequences
determine the expected activity completion time
 Delays
and its variance. Thus, PERT is a probabilistic
 Increased costs
technique: it allows us to find the probability of
 Inability to meet specifications the entire project being completed by any given
 Project termination date.
 CPM, on the other hand, is called a deterministic
Risk Management approach. It uses two time estimate, the normal
 Identify potential risks time and the crash time, for each activity
 Analyze and assess risks
 Work to minimize occurrence of risk
 Establish contingency plans
Importance of PERT/CPM Determining the Critical Path
By using PERT and CPM analysis you will be able to Step 1: Make a forward pass through the network as
answer questions such as: follows: For each activity i beginning at the Start node,
1. When will the entire project be completed? compute:
2. What are the critical activities or tasks in the  Earliest Start Time (ES) = the maximum of the
project, that is, the ones that will delay the entire earliest finish times of all activities
project if they are late? immediately preceding activity i. (This is 0 for
3. Which are the noncritical activities, that is, the an activity with no predecessors.). This is the
ones that can run late without delaying the whole earliest time an activity can begin without
project’s completion time? violation of immediate predecessor
4. What is the probability that the project will be requirements.
completed by a specific date?  Earliest Finish Time (EF) = (Earliest Start Time)
5. At any particular date, is the project on schedule, + (Time to complete activity i. This represent
behind schedule, or a head of the schedule? the earliest time at which an activity can end.
6. On any given date, is the money spent equal to, The project completion time is the maximum of the
less than, or greater than the budgeted amount? Earliest Finish Times at the Finish node.
7. Are there enough resources available to finish the Step 2: Make a backwards pass through the network
project on time? as follows: Move sequentially backwards from the
8. If the project is to be finished in a shorter amount Finish node to the Start node. At a given node, j,
of time, what is the best way to accomplish this at consider all activities ending at node j. For each of
the least cost? (crash analysis) these activities, (i,j), compute:
 Latest Finish Time (LF) = the minimum of the
CPM latest start times beginning at node j. (For
 Finding the critical path is a major part of node N, this is the project completion time.).
controlling a project. This is the latest time an activity can end
 The activities on the critical path represent tasks without delaying the entire project.
that will delay the entire project if they are  Latest Start Time (LS) = (Latest Finish Time) -
delayed. (Time to complete activity (i,j)). This is the
 Manager gain flexibility by identifying noncritical latest time an activity can begin without
activities and replanning, rescheduling, and delaying the entire project.
reallocating resources such as personnel and Step 3: Calculate the slack time for each activity by:
finances  Slack = (Latest Start) - (Earliest Start), or
= (Latest Finish) - (Earliest Finish).
Project Network A critical path is a path of activities, from the Start
 A project network can be constructed to model node to the Finish node, with 0 slack times.
the precedence of the activities.
 The arcs of the network represent the activities. Example: ABC Associates
 The nodes of the network represent the start and Consider the following project:
the end of the activities.
 A critical path for the network is a path consisting
of activities with zero slack. And it is always the
longest path in the project network.

Drawing the project network (AOA)

 An activity carries the arrow symbol. This
represent a task or subproject that uses time or Example: network
resources
 A node (an event), denoted by a circle , marks
the start and completion of an activity, which
contain a number that helps to identify its
location. For example activity A can be drawn as:

This means activity A starts at node 1 and finishes at

node 2 and it will takes three days
Example: ABC Associates CRASHING -2
Earliest/Latest Times

The estimated project completion time is the Max EF

at node 7 = 23.

CRASHING 3 - Project Crashing

Project Life Cycle Stages

Level of Effort

Definition Planning Execution/Impl./Control Closeout

 Selection  Estimates  Status Reports  Training
 Charter  Schedules  Changes  Transfer
 Goals  Sequencing  Quality Documents
 Specs  Budgets  Forecasts  Release
 Tasks  Resources Resources
 Responsi  Risks  Lessons
bilities  Staffing Learned

Recall Pert/CPM Estimates

Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A None 3 6 15
B None 2 4 14
C A 6 12 30
D A 2 5 8
E C 5 11 17
F D 3 6 15
G B 3 9 27
H E,F 1 4 7
I G,H 4 19 28
More PERT/CPM Estimates
 Activity Time Estimates for beta distribution
a. optimistic time, usually about 1 percent
chance activity can be completed within a
b. most likely time
c. pessimistic time, usually about 1 percent
chance that activity will take longer than c.
Activity j’s expected time (b distribution)

Activity j’s variance (b distribution)

Crashing Activities
 Activity & project duration may be influenced by
resource allocation decisions…more resources—
less time needed
 Sometimes, we can expedite completion of a task
by assigning more people or equipment. Thus,
PERT Notation total direct costs tend to vary inversely with
project duration. Indirect costs, however, tend to
increase with overall project completion time.

Time-Cost Tradeoffs in CPM

Project Completion Probability Basic Assumption: Some activities can be expedited,
at a cost
Why accelerate an activity?
 Complete the task in a shorter duration, thereby
reducing the duration of the critical path, thereby
reducing the length of the project
PERT Network - Avoid late penalties
- Earn early completion incentive payments
Time Cost Problem: Determine the optimum project
duration based on time-cost tradeoffs

Project & Activity Costs

PROJECT DIRECT COSTS: Directly assigned to work
package or activity
 “Normal” costs for “normal” time
- Direct labor expenses
- Materials
- Equipment
- Subcontractors
- INDIRECT EXPENSES: Cannot be associated
with any work package or activity
 Overhead expenses
- including supervisory expenses
- administration
- contractual penalties or early completion
incentives
 Consulting
Time & Costs: Normal vs. Crash Time/Cost Trade-off Analysis
 For the time-only CPM project schedule, we  You might think that total project costs will
typically assume that activity duration is fixed at increase when we begin to crash activities
its NORMAL TIME, or the duration with the lowest  But, total project costs consist of both indirect
direct activity cost (i.e., NORMAL COST). (project-based) costs (PBC) and direct (activity-
 However, some activities may be expedited if based) costs (ABC)
higher resource levels are available. The shortest - ABC (direct) go up when we crash activities in
activity duration is called CRASH TIME. The cost an effort to finish the project early
to complete an activity in that amount of time is - But, PBC (the indirect costs) go down if we
called CRASH COST. finish the project early

Linear Time-Cost Tradeoff Which Activities are the Best Candidates for Crashing?
In theory, the normal or expected duration of a task  Any activity that is on the critical path
can be reduced by assigning additional resources to  Activities with relatively long durations
the task  Bottleneck activities (that appear on multiple
critical paths)
 Activities with relatively low costs to crash
 Activities that are not likely to cause quality
problems if crashed
 Activities that occur relatively early in the
schedule and are labor intensive

Selecting Activities to Crash Options for Crashing Activities

 Cost Slope = Rise / Run  Adding Resources
 Cost Slope = CC – NC / NT – CT  Outsourcing Project Work
 = (CC – NC)/(NT – CT)  Overtime
where,  Establishing Core Project Team
 CC = Crash Cost  Temporary Fixes
 NC = Normal Cost  Fast-Tracking
 NT = Normal Time  Critical Chain PM
 CT = Crash Time  Brainstorming
Calculate for each activity on Critical Path  Reducing Scope
 Phasing Project Deliverables
Balancing Overhead & Direct Costs
Potential Problems with Crashing
 Reduced flexibility and less margin for
errorincreased risk of failure to complete
project on time
 Raises potential for poor quality
 Increases potential for staff burnout, stress, and
turnover (from what Yourdon calls Death March
projects)
Software Project Schedules  Raises activity-based costs
“Observe that for the programmer, as for the chef,  May negatively affect other projects
the urgency of the patron may govern the scheduled  May create unrealistic expectations for future
completion of the task, but it cannot govern the projects
actual completion. An omelet, promised in ten  Hard to know true indirect costs
minutes, may appear to be progressing nicely. But
when it has not set in ten minutes, the customer has
two choices--wait or eat it raw. Software customers
have the same choices.
The cook has another choice; he can turn up the heat.
The result is often an omelet nothing can save--
burned in one part, raw in another.”
Time-Cost Tradeoff Heuristic
1. Set each activity duration to its normal time.
Total
= $525
2. Determine the critical path(s) and project B E
Direct Cost
Total
duration based on the current activity times. 6 8
Duration = 22 units

3. Calculate total direct costs and indirect costs for

A C G
the current schedule.
2x 10 6
4. Chose an activity or activities that can be D F Activities Changed
expedited to reduce project duration by one time 10 4x F
$30
unit. Use cost slopes and critical path information
to guide your choice. If no further reduction in Total
= $610
project duration is possible, go to step 5. B E Direct Cost
Total
Otherwise, go to step 2. = 21 units
6 7 Duration

5. Plot the project's direct and indirect costs for each A C G

possible duration. Select the duration that
2x 9x 6
minimizes total costs. D F Activities Changed
C D E
9 4x
$30 $25 $30
Network Crashing Example

Crashing Summary
Network Crashing Example
Initial Total
= $450
 In planning, crashing can pull your project into the
Direct Cost
B E
Total delivery window
= 25 units
 Once started, a late project can get pulled back in
Duration
6 8
A C G Select activity “A”
[smallest slope] and
to schedule compliance
3 10 6
reduce time by 1 unit (x
in next panel indicates  Crashing can increase the size of the “critical
D F activity crashed by
maximum core,” thereby reducing flexibility
11 5  Capability in MS Project
Total
= $470
B E Direct Cost
Total
6 8 Duration = 24 units

A C G

2x 10 6
D F Activities Changed
A
11 5 $20

Total
Direct Cost = $495
B E
Total
Duration = 23 units
6 8

A C G
2x 10 6
D F Activities Changed
D
10 5 $25