Tag Archives: project cost

Accelerating Project Completion

216858_10151003023871423_1857316995_n   Andrew J. Malanga, Hong Kong, 2014

Reducing project scope to accelerate a project. 

             Project scope is very important and defines the end result or mission of the project.  Project scope is developed under the direction of the project manager and the customer and is a map of sorts used by the project owner and participants for project planning and to measure project success.  [pullquote]Changing the project scope is risky because doing so often results in a reduction in project functionality. [/pullquote] Changing the project scope is risky because doing so often results in a reduction in project functionality. Although reducing or changing project scope may seem an attractive remedy to meet unreasonable deadlines or reduce costs, the risks to the ultimate project end state is significant. Some ways to mitigate these disadvantages of reducing product scope all revolve around insuring that the customer get the product expected.  If you can reduce the scope of a project without reducing either its functionality or value, then you have most likely made you scope more practical and reasonable and will get the customer what the customer expects.  Otherwise, it is important to communicate changes with the customer because it may be that the customer is willing to compromise some functionality for a savings in either time or costs.

Reducing the project duration increases the risk of being late. 

             This seems counter-intuitive but it is easily explained how this situation occurs.  The risk of being late in a project in which you “crash” the duration increases as the “sensitivity” of the project network increases.  This “sensitivity” is related to the number of critical or near-critical paths within the project network.  This is important because critical or near-critical paths have little or no slack and if delayed, then delay the entire project.  If there are 20 separate activity paths in a project network and 3 are critical then the risk of a project delay is less than if that same project had 15 critical paths.  The latter poses 12 more opportunities for a project delay.  So when you reduce project time by reducing the durations of specific activity paths, they then become near-critical or critical paths.  This reduces overall scheduling flexibility and increases the risk that the project will be late.

Project Cost-Duration calculations and determining which activities to shorten

Using a project cost-duration graph is a way to determine how the cost and duration trade-off can reveal the optimal cost-time schedule for a project.  Central to this technique is understanding that project managers must seek critical activities that can be shortened but with the smallest increase in associated cost per unit [pullquote] project managers must seek critical activities that can be shortened but with the smallest increase in associated cost per unit [/pullquote] of time. The network diagram below is a simplified example.  Here we are calculating direct and indirect costs for the project with a specified number, six, activities (A – G) required to complete the project with associated time units (duration) per activity. The indirect cost for each project duration is $400 (19 time units), $350, (18), $300 (17), and $250 (16).  The maximum time reduction for any activity is the difference between the normal time and the crash time. Let’s say activity A has a crash time of 2 units at $70 but with a normal time of 3 units at $50. The maximum time reduction for activity A is, therefore, 2 units.  The corresponding crash costs represents a slope. Slope=(crash cost -normal cost )/(normal time-crash time) =        ($70-$50 )/(3-2)= $20 per period reduced. table 1 graph 1 In the sample graph and network diagrams above the critical path is represented by the red arrows.  You can see in the second box with time “18” that the critical path is A, B, E, G and it is not possible to shorten act G, therefore, act A is circled because it has the least cost, an x has been placed in the duration for Act A to indicate it can be reduced no further.  Similarly, in the third box with time “17”, there are 3 critical paths and Act E is circled because it can be reduce by one unit of duration. graph 2In the end 17 time units and $840 is the optimum cost-time project duration because, as illustrated by the graph above, any movement away from 17 time units represents an increase in project costs.
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