Delay Analysis: Time Cost Optimisation

Content for the day

Delay analysis concepts

 The planning of project is concerned with modelling the work of the project.
It also concerns the availability of the various resources used on the project.
 If any of the key resources change significantly the result will either be a
need to accelerate work or accept delay.
 Variances to the baseline plan programme will occur and if agreed by the
client and contractor are termed changes. However, where agreement is not
reached then it becomes a claim.
 Today’s world is becoming evermore litigious. No two projects are the same,
nor are two claims exactly the same.
Project acceleration

 The starting point for investigating the causes of delay in the project is during
the implementation phase of the project life-cycle – this retrospective
analyses will attempt to evaluate:
 Whether the project could feasibly be completed within the time and cost
constraints of the client including the procurement path;
 The role and preparation of programmes, histograms and resource schedules
prepared by the contractor to meet the client’s requirements
 The path played by Critical path Analyses (CPA) in planning the works
 The obligation and entitlement of the client, contractor and sub-contractors as
detailed in the contract, with special regard to those provisions relating to time;
 The procedures for reporting on progress and for dealing with problems in a timely
fashion so as not to lead to the work being delayed.
Application in the Built Environment

 Time cost optimisation

 Goldratt’s critical chain method

 The last planner

 Aim

 At the end of this session you will:

a) Be able to apply TCO to simple networks
Time and cost control (TCO)
(Time-cost optimisation)
 In programming this is a method which can be
applied to the network with two main
objectives:

1. To determine the implications of differing methods of doing

the same work, for example different items of plant or sub-
contractors which exhibit differing durations and cost; and

2. To evaluate cost effective methods of accelerating work

output when delays have been incurred or "crashing".
This can often be a method of determining a value upon
client interference, adverse weather conditions or
variations to project work.
 Objectives of TCO

 To ensure that for a shorter duration for doing work there is an addition in
overall cost…

 This is founded on the basis of lower site attendance

costs or liquidated damages or, when this cannot be
achieved, that the lowest additional cost has been
incurred
 Approach

 Consider those activities which directly relate to project

duration: i.e. the critical path in the network

 Establish the optimal (original) activity data, this data in its

most basic sense will include the activity duration [i.e. normal
duration] (ND) and direct cost [i.e. normal cost](NC)

 If one is considering reducing activity durations, obtain the

crash costs (CC) and crash durations (CD) of increases or
changes in resources
 Usually there will be an increase in cost with
respect to the proportional reduction in duration

 Thisarises due to the reduction in the proportion of

supervisor's time to labour time for each gang applied
to the work

 This improvement will gradually reduce however,

to a constant activity time, at which point one
can no longer apply further resources, see
figure…
Cost v Time (i.e. Duration) curve

Cost

Crash cost (CC)

Normal cost (NC)

Activity duration
Crash Duration (CD) Normal Duration (ND)
 Crashing Rate

 Determine the increase in costs for each activity per day [i.e. the crashing rate],
where…

Crashing Rate = (CC - NC) / (ND - CD)

Example

 From the data provided, indicating activities comprising a section of a larger

network, determine the minimum additional cost incurred when reducing the
overall duration to…


(i) 18 days
(ii)15 days
Activity Normal Time Crash Time Normal Cost Crash Cost
[Days] [Days] [£] [£]
1-2 6 4 7630 9200
1-3 7 4 6072 8349
1-4 7 5 8832 11040
2-5 6 3 5520 7590
3-4 6 3 6624 9108
3-5 8 5 6808 9361
4-5 5 3 5152 6440
4-6 6 4 7912 9890
5-6 4 3 7176 8073
Method

1. Calculate the ‘Crash rate’ for each activity;

2. Draw the logic network for the project;
3. Identify the critical activities and critical path;
4. Determine the overall project duration;
5. Identify the least cost critical activity and reduce its duration
by 1 unit;
6. Record the number of units you have reduced the activity by
7. Record the cost [crash rate] for reducing the duration by 1
day;
8. Repeat 3, 4, 5, 6 and 7; until the project duration has been
reduced to the specified time.
Activity Normal Crash Time Normal Crash Cost Crash Rate
Time [Days] Cost [£] [£]
[Days] [£]
1-2 6 4 7630 9200 785
1-3 7 4 6072 8349 759
1-4 7 5 8832 11040 1104
2-5 6 3 5520 7590 690
3-4 6 3 6624 9108 828
3-5 8 5 6808 9361 851
4-5 5 3 5152 6440 644
4-6 6 4 7912 9890 989
5-6 4 3 7176 8073 897
Logic Network

4
6

1 3 5

2
(i) Critical Path and Overall Project
Duration

4 6 days
7 days 6
6 days 5 days

7 days 8 days 4 days

1 3 5

6 days
6 days

2
Overall project duration =
Crash by 1 day the least cost
activity on the Critical path

4 6 days
7 days 6
6 days 4 days

7 days 8 days 4 days

1 3 5

6 days
6 days

2
Overall project duration =
NB has the Critical Path changed?
Repeat until the overall project
duration = 18 days

4 6 days
7 days 6
6 days 3 days

5 days 8 days 4 days

1 3 5

6 days
6 days

2
Overall project duration = 18 days
Additional cost = £2806
(ii) Repeat until the overall
project duration = 15 days

4 6 days
7 days 6
5 days 3 days

4 days 8 days 3 days

1 3 5

6 days
6 days

2
Overall project duration = 15 days
Additional cost = £2484
Exercise 1

 The table below contains durations and cost

information for a work package within a larger project
schedule. Using the data, determine the overall net
saving of reducing (crashing) the project from its
normal duration down to 19 weeks. The cost of
preliminaries (fixed overheads) are £1200 per week.
Comment on the financial viability of the result.
Table for Exercise 1

Activity Normal Normal cost Crash Crash cost (CC)

Duration (ND) (NC) Duration (CD) £’000
(wks) £’000 (wks)
1-2 5 600 3 700
1-3 4 200 3 400
2-4 3 150 3 150
2-5 2 400 2 400
3-4 7 420 5 640
4-7 1 50 1 50
4-8 5 300 4 400
5-6 6 660 3 900
6-9 5 200 2 380
7-9 7 160 5 210
8-9 5 100 4 130
Exercise 1 Network

1 2 5 6

3 9
4 7

8
Conclusion
References