Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

Module 5
Optimization in project Management
Time cost trade-off is a project management concept that describes the relationship between the time
required to complete a project and the cost of doing so. Time cost trade off analysis involves accelerated
activity durations that are obtained by allocating more resources, and lead to shorter project duration
and lower indirect cost at the expense of higher direct cost.
Time-cost trade-off analysis allows a contractor to build a project using an optimal schedule that leads
to minimum cost. The financing cost can be minimized if the financing decision considers different
financing alternatives such as short-term and long-term loans and lines of credit. Financing optimization
should be integrated into time-cost tradeoff analysis to minimize total cost and maximize profit.
Rules/ Steps in crashing a network.

Step 1: Analyze the critical path. ...

Step 2: Identify all tasks that can be shortened with additional resources. ...

Step 3: Calculate for each task: trade-off, gain, time reduction. ...

Step 4: Choose the least costly approach. ...

Step 5: Provide a crashing budget and updated project baselines to the sponsor.

[Note: The critical path should not be changes]

The objective of the time-cost trade-off analysis is to reduce the original project duration,
Determined form the critical path analysis, 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:
1. Finish the project in a predefined deadline date.
2. Recover early delays.
3. Avoid liquidated damages.
4. Free key resources early for other projects.
5. Avoid adverse weather conditions that might affect productivity.
6. Receive an early completion-bonus.
7. Improve project cash flow

Question) Activity A must precede all other while activity E must follows others.
Activity Normal Crash
Duration(days) Cost(Rs) Duration(days) Cost(Rs)
A 5 3000 4 4000
B 6 1200 2 2000
C 4 1000 3 1800
D 5 1200 3 2000
E 3 1600 3 1600

Question a) Draw the network and identify the critical path?

Question b) Crash the network fully to find out min duration?
Question c) If indirect cost are Rs300/day, determine the time cost trade-off for the project?

Answer) First of all the cost slope for each activity is calculated, using the formula provided below.

Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

 Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

𝑐 −𝑐
Cost slope: 𝑇𝑐 −𝑇𝑛
𝑛 𝑐
Where:𝐶𝑐 =Denotes crashing cost,
𝐶𝑛 = 𝐷𝑒𝑛𝑜𝑡𝑒𝑠 𝑁𝑜𝑟𝑚𝑎𝑙 𝑐𝑜𝑠𝑡
𝑇𝑛 = 𝑁𝑜𝑟𝑚𝑎𝑙 𝑇𝑖𝑚𝑒
𝑇𝑐 = 𝐶𝑟𝑎𝑠ℎ𝑖𝑛𝑔 𝑐𝑜𝑠𝑡
Activity A B C D E
Cost 1000 200 800 400 0
Slope(Rs/day)

Step 1:
Critical path = 1-2-3-5-6
Normal duration = 14 days
Total cost= Normal cost+ crash cost+ Indirect Cost
Total cost= 8000+0+ (300*14) = 12,200/-
Note: Project length can be reduced by crashing the critical activities.
1-2-3-5-6 = 14 days(critical path)
1-2-5-6 = 12 days
1-2-4-5-6= 13 days

Step 2: Crash activity B by 1 day.

Project duration= 13 days
Total cost= previous cost + crashing cost-indirect cost
= 12,200 + (200*1) – (300*1) = 12,100/-
1-2-3-5-6 = 13 days (Critical Path)
1-2-5-6 = 12 days
1-2-4-5-6= 13 Days (Critical Path)

Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

 Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

Step 3: Crash activity (B+D) by one day

Project duration 13-1=12 days
Total cost = Previous Total Cost+ Crash Cost- Indirect cost
= 12100+ (600*1) – (300*1) = 12400/-
1-2-3-5-6(Critical Path)
1-2-5-6(Critical Path)
1-2-4-5-6(Critical Path)

Step 4: Now for crashing we have two option. These are

Option 1: A = 1000
Option 2: B+C+D =1400
For crashing, option 1(Activity A) will be chosen because crashing cost is less in this.
Crash Activity A by 1 day, project duration = 12-1 = 11 days
Total cost = Previous Total Cost + Crash Cost – Indirect cost
= 12400+(1000*1)-(300*1)= 13100/-

Step 5: Now crash activity B+C+D.

Crash Activity (B+C+D) BY 1 day.
Project Duration = 11-1 = 10 days
Total Cost= previous Total Cost+ Crash cost – Indirect cost.
= 13100 + (1400*1) – (300*1)

Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

 Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

=14,200/-
Duration(days) Total Cost(Rs)
14 12,200/-
13 12,100/-
12 12,400/-
11 13,100/-
10 14,200/-

The time cost trade off exist at 13 days when B is crashed by 1 day and total minimum is 12,100/-

Scheduling with Limited Resources.

Resource-limited scheduling is an approach that considers the availability of resources when setting the
start and finish dates for a project. This approach works well when project managers face the challenge
of securing necessary resources because they are scarce or in high demand.

Resource-limited scheduling aims to ensure the project can be completed in the shortest time
using the resources within reach. Project managers who use this approach find it results in a
more realistic schedule, even though it also restricts flexibility and increases the criticality of
each event in the project.

Project managers must consider the resources available to them throughout the project duration
if they want to keep it on schedule. When using resource-limited scheduling, if they start a
project under the assumption that they will be able to secure resources during later stages, they
risk delaying or canceling the project.

Ways Project Schedule Resources are Limited

In project management, resources can be limited in several ways that directly affect the
schedule. Projects rely on tangible resources like money, people, and materials, as well as
intangible resources like time, knowledge, and skills. Some of these limitations overlap. For
example, a worker with a specific skill set may expect more compensation, which can cut into
the available funding.

 Money: The cost of equipment and materials may increase after the project starts, or
current funding may be insufficient to pay for supplies and workers needed.
 People: The project manager may have difficulty finding people available to work on
the project during the project schedule.
 Time: An outdoor project may be limited by the time of year it is scheduled. Working
outdoors during the summer or winter may not be possible in some climates.
 Materials: Supply chain disruptions or scarcity can make it challenging to get materials
to the work site and can slow down the schedule.
 Equipment: The project manager needs to ensure workers have access to the
equipment they need to complete the project on time.
 Space: Some tasks within a project may require a specific type of workspace, such as
a warehouse or outdoor field.
 Information: For some projects, the project manager must share information related to
the project, such as a style guide or standard operating procedures (SOPs). Ensuring
everyone has this information and understands it can prevent schedule delays.
 Knowledge: If the project requires specific knowledge, the workers may need training
before they can begin working. This can slow the schedule.

Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

 Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

 Skills and Abilities: Some projects require specialized skills, which may not be
available in the pool of workers. Outsourcing that part of the work can impact the
budget and schedule.
 Other Resources: Items like energy needed to run equipment or internet access can be
limited in some areas.

Example:

Activity Days Resources

Machine Man
1-2 7 2 20
1-3 7 2 20
2-3 8 3 30
2-4 6 4 30
3-6 9 2 20
4-5 3 2 20
5-6 5 2 20
Available Resources 4 40

13
7 16
7
16
2 4
0 19
0

1 5

15 24
15 24

3
6

The squared network for the above diagram will be.

Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

 Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur

2(20)

2(20) 3(30) 2(20)

1 2 3 6

2(20) 2(20)
4(30)
4 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
25 26 27 28 29 30
Now draw it according to the scheduling plan provided in the table.

2(20)

2(20) 2(20)
3(30) 6
1 2 3

2(20)
4(30)
5
4

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Dr Vikash Murmu, Assistant Professor, RVSCET Jamshedpur