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Chapter 9 REDUCING PROJECT DURATION Review Questions 1. What are five common reasons for crashing a project? Reasons given could include: • • • • • • •

Imposed deadline in which disfavor will be earned by not meeting superior’s deadline Time to market competitive advantage Realize benefits from incentive contracts To make up for lost time and avoid contract penalties Save extensive overhead costs Free up resources to work on other projects Exceed customer expectations.

2. What are the advantages and disadvantages of reducing project scope to accelerate a project? What can be done to reduce the disadvantages? Reducing the scope of the project can lead to big savings both in time and costs. It typically means the elimination of certain tasks. At the same time scaling down the scope may reduce the value of the project such that it is no longer worthwhile or fails to meet critical success parameters. The key is reassessing the project requirements to determine which are essential and which are optional. This requires the active involvement of all key stakeholders. More intense re-examination of requirements may actually improve the value of the project by getting it done more quickly and for a lower cost. 3. Why is scheduling overtime a popular choice for getting projects back on schedule? What are the potential problems for relying on this option? Scheduling overtime is popular because if it involves salary workers and no direct costs are added to the project. Even if it involves additional costs, you avoid Brook’s law and minimize additional coordination and training costs. The disadvantages are the additional time and half costs associated with hourly overtime and stress and fatigue that come with working long hours which can lead to accidents, inferior performance, and turnover. 4. Identify four indirect costs you might find on a moderately complex project. Why are these costs classified as indirect?

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Indirect (overhead) costs are costs that cannot be attributed to a specific activity or work package. Examples of indirect costs are supervision, consultants, debt interest charges, machinery common to several activities, accounting and information processing, public relations, penalties or incentives for early or late completion. In practice it is amazing how many project compression decisions are made without serious consideration of indirect costs. 5. How can a cost-duration graph be used by the project manager? Explain. A cost-duration graph is useful to the project manager for comparing alternatives. Any alternative that moves the project duration away from the optimum cost-duration point will increase costs. Additionally, incentives and penalties can be evaluated against the total, low cost point. 6. Reducing the project duration increases the risk of being late. Explain. Compressing the project duration means slack (float) on noncritical activities will be reduced. When slack of noncritical activities is reduced, the chance of new critical paths occurring increases; hence, the risk of the project becoming late increases. In addition, compressing will have the following other impacts on managing the project: • • • • •

Reduces flexibility by using slack Can increase number of critical activities Can increase interdependencies of paths Makes resource scheduling tighter (critical) May increase costs.

7. It is possible to shorten the critical path and save money. Explain how. The only way to shorten the critical path and save money is to have indirect costs which are greater than the additional direct costs of shortening the critical path one unit of time. The difference is a savings. Exercises Note: Use the procedure presented in the chapter example to compute exercises; that is, compress one time unit per move using the least-cost method. 1. Draw a project network from the following information. Activity A B C D

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Predecessor None A A A

Duration 2 4 3 2

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E F G H I J

B C C, D E, F G H, I

3 6 5 6 5 5

Activities B and H can be shortened to a minimum of 2 weeks. Which activity would you shorten to reduce the project duration by 2 weeks? Why?

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3. Given the data and information that follow, compute the total direct cost for each project duration. If the indirect costs for each project duration are $90 (15 time units), $70 (14), $50 (13), $40 (12), and $30 (11), compute the total project cost for each duration. What is the optimum cost-time schedule for the project? What is this cost?

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4. If the indirect costs for each duration are $1,200 for 16 weeks, $1,130 for 15 weeks, $1,000 for 14 weeks, $900 for 13 weeks, $860 for 12 weeks, $820 for 11 weeks and $790 for 10 weeks, compute the total costs for each duration. Plot these costs on a graph. What is the optimum cost-time schedule? Note: The duration for this schedule is weeks and students should be told only to crash the network one week at a time (not days).

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For duration 14, B is chosen over D & E because it is the earliest task. If problems occur, you can crash D or E.

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5. If the indirect costs for each duration are $300 for 27 weeks, $240 for 26 weeks, $180 for 25 weeks, $120 for 24 weeks, $60 for 23 weeks, and $50 for 22 weeks, compute the direct, indirect and total costs for each duration. What is the optimum cost-time schedule? The customer offers you $10 dollars for every week you shorten the project from your original network. Would you take it? If so for how many weeks? Note: The duration for this schedule is weeks. Students should be reminded that they crash the schedule one week at a time (not divide the week into days).

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6. Use the information contained below to compress one time unit per move using the least cost method. Reduce the schedule until you reach the crash point of the network. For each move identify what activity(s) was crashed, the adjusted total cost, and explain your choice if you have to choose between activities that cost the same. Note: Crash point of the network is the point in which the duration cannot be reduced any further. Activity ID A B C D E F G H I

Slope $40 40 40 40 40 30 30 -

Direct Costs Normal Crash Maximum Crash Time Time Cost Time Cost 0 4 $50 0 3 5 70 2 $190 1 5 80 4 120 2 4 40 2 120 2 5 60 3 140 1 5 50 4 90 1 4 70 3 160 1 4 80 3 110 0 3 50 0 Total direct normal costs— $550

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Case Nightingale Project—Part A Note: The answers provided are based on a January 1, 2010 start date which due to holidays means the project begins on January 4, 2010.

1. Will the project as planned meet the October 25th deadline? No, the scheduled completion date is 12/21/10. 2. What activities lie on the critical path? Architectural decisions  Feature specifications  Database  Review design  Integration  Procure prototype components  Assemble prototypes  Lab test prototype  Field test prototypes  Adjust design  Order stock parts  Assemble first production unit  Test unit  Produce 30 units  Train sales representatives. 3. How sensitive is the network? The text defines sensitivity as the likelihood that the critical path may change during the course of the project. Sensitivity results from the number of critical paths and the amount of slack available to non-critical activities. Based on the information provided, this project is a fairly insensitive network. Most non-critical activities have between 20-37 days of slack, exceeding their estimated 18

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duration times. The lone exceptions are Price components which has only 5 days of slack and Order custom parts which has 8 days of slack. However, given the nature of these tasks it is unlikely that they will take more than 5 days beyond their estimated duration time to complete. It should also be noted that, after an initial burst of activities, there are only two non-critical activities (Document design and Order custom parts) during the second half of the project.

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