Time-Cost Trade-Off

Presented by
Mervyn Malvar, M.Eng
Department of Civil Engineering
Gokongwei College of Engineering
De La Salle University
Activity Time-Resource Concept
• Activity duration depends on the following:
• Method to be used
• Quantity of the works involved
• Estimating department will be aware of the quantity; however,
project support may have to be consulted to determine the
method to be followed.
Concept of time-cost-trade-off
• Time-cost-trade-off occurs when we would like to accelerate the
construction project
• We attempt to reduce the durations spent on an activity
• Based on the network diagram, each activity’s duration can be
reduced
• However, only activities on critical path can affect the duration.
• Usually recommended/discussed at early stages of the project.
Total Project Cost vs Time Extension
DIRECT COSTS INDIRECT COSTS
• Material Costs • General Preliminaries
• Management and Technical
• Labor Costs
Overhead
• Equipment
• Temporary Facilities
• Can be assigned to individual • General Site Expenses (Safety,
activities Security, Housekeeping)
• Major equipment (including
FOL, maintenance)
• Permits
• Owner’s / Consultant’s / CM’s
Temporary Facilities
• Expats, Travel benefits
• Barging and Shipping Charges
• Design Services / Professional
Fees
Total Project Cost vs Time Extension
INDIRECT COSTS
• Taxes (Contractor’s Tax, VAT, etc)
• Bonds and Insurances (Surety
Bond, Guarantee Bond, CARI, etc)
• Basically the cost of doing business
• Applied to the whole project
Direct Cost
• Cost on each activity in the project network
• BOQ cost per item
• Direct costs increases when duration is shortened
Indirect Cost
• General overhead
• Indirect costs decreases when duration is shortened
Total Cost
• Sum of direct and indirect costs at any point in time
• It is natural for a contractor to perform any project at the
minimum total cost
 Calculation of TCTO

A,5 B,3 C,7 E,6 H,10

D,5 F,5 I,8 K,10 K,3

G,7
 Calculation of TCTO

ACTIVITY NORMAL CONVENTIONAL CRASH DIFF SLOPE

TN CN TCE CE TC CC TN-TC
A 5 500 5 500 5 500 0 -
B 3 900 2 1,050 1 1,200 2 150
C 7 3,250 5 3,850 4 4,150 3 300
D 5 1,000 3 1,300 3 1,300 2 150
E 6 1,400 5 1,850 3 2,750 3 450
F 5 1,100 3 1,500 3 1,900 2 400
G 7 1,500 3 2,400 4 2,400 3 300
H 10 4,200 8 5,400 5 7,200 5 600
I 8 800 6 1,000 4 1,500 4 VARIABLE
J 2 1,100 2 1,100 1 1,300 1 200
K 3 1,300 3 1,300 2 1,500 1 200
TOTAL 36 17,050 30 21,250 21 25,700
Cost Curve
Normal to Crash
39500

39000

38500
Minimum Direct
Cost Curve
38000
Cost

37500

Maximum Direct
37000 Cost Curve

36500

36000

35500
24 25 26 27 28 29 30 31
Duration
Method 1.1: Minimum Cost Curve from Normal
Start
• Normal start aims to develop the project’s minimum direct cost
curve from the normal time-cost point
• i.e. Shorten the project duration at the least possible increase in
cost
Method 1.2: Minimum Cost Curve from all Crash
Start
• To reduce the cost downward, the criteria are
• Activities must be non-critical
• Must have the current maximum cost slope
• Activity can be lengthened / extended
• To extend the project duration, the criteria are
• Activities must be critical
• Must have the current maximum slope
• Activity can be lengthened / extended
Method 1.2: Minimum Cost Curve from all Crash
Start
• To reduce the cost downward, the criteria are
• Activities must be non-critical
• Must have the current maximum cost slope
• Activity can be lengthened / extended
• To extend the project duration, the criteria are
• Activities must be critical
• Must have the current maximum slope
• Activity can be lengthened / extended
Assignment No. 4

Preceding Normal Crash

No. Activity CT-NT Cost slope
Activity Time Cost Time Cost
5 A - 2 2400 2 2400 0 -
10 B 5 10 5000 10 5000 0 -
15 C 5 15 3000 7 3800 8 100
20 D 10 5 5000 2 6500 3 500
25 E 15 3 1800 3 1800 0 -
30 F 10 9 4500 9 4500 0 -
35 G 20.25 5 6000 5 6000 0 -
40 H 25 6 3600 4 4200 2 300
45 K 30,35,40 4 4800 4 4800 0 -
36100
Assignment No. 4
1. What is the project duration considering normal conditions?
2. Derive minimum and maximum direct cost curve (Normal to
Crash)
3. Derive maximum and minimum direct cost curve (Crash to
Normal)
4. What is the significance if your total direct cost lies
1. Inside the minimum and maximum direct cost curve?
2. Outside the minimum and maximum direct cost curve?