Question

1. Explain the cost structure for reducing the project duration (crashing). Which cost is used to crash the project? Discuss why this cost is important to use for the crashing?

2. Reducing the project scope is one of the options used to accelerate the project completion. What are other options that may be considered when crashing the project, operating under resource constrained? Are there any risks associated with reducing the project duration? Briefly explain.

Answer 1

1. Projects are temporary endeavors undertaken to build / manufacture / develop something. There are a wide variety of requirements for achieving projects including resources such as manpower, material, equipment, tools, consumables etc. Time, money etc. are also inputs for projects to get the required outputs. Classically, there is a link between the time, cost and quality aspects of projects. Changing on of these will affect the other two. If you increase time, cost and quality can go up while if you reduce cost, time may increase and quality may go down. These three are linked to each other.

When a project is planned, first the project statement of work or SOW is prepared. It is then broken down to work breakdown structure or the WBS which will further be broken down to activity levels. The activities are linked together by using precedence method. It is a method of linking activities by looking at their precedence and successions. After this is done, critical path of the project will be established using critical path method or program evaluation and review technique. Critical path method is the common technique used.

Critical path is the path of projects which delay may cause delaying the entire project. It will not have much slack, or periods of time the project can be delayed without affecting the completion date, to play with. In real world scenarios, we will often be pushed to decrease the duration of projects. There are many ways to achieve this like fast tracking, crashing etc. As you have seen from the above, time, cost and quality are interlinked and you can influence time by manipulative cost and quality. Quality will be a fixed variable in most of the projects as influencing the factor can lead to project failures. Therefore, we will be left with two variables, the cost and time, in most scenarios.

Cost structure is the structure of how costs are broken down in projects. It is similar to WBS in which the structure is of work. Cost can be broadly classified into direct and indirect. Direct costs are the costs those are directly linked to projects such as material costs, direct manpower costs, equipment or machinery costs, tools costs, subcontract costs etc. Indirect costs include the fixed costs for offices, administration costs, indirect manpower (managers, engineers etc.) costs etc.

Crashing involves spending more money to expedite completion of projects. This will involve working overtime, announcing incentives for early completion, involving additional resources to activities etc. Usually critical path activities are subjected to crashing since crashing activities those are not in the critical path will not help reduce duration. As the project progresses by crashing critical path activities, critical path may change and non-critical activities may become critical. As it becomes critical, those may also be crashed for expediting purposes. By crashing, you will be involving more resources like direct manpower, equipment, tools etc. Material costs will remain the same as materials cannot increase unless scope changes. Overall, the direct costs of projects will go up when you crash projects. The cost of crashing is known as crash costs.