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Lecture 10

Project Planning and Monitoring

Lecturer: Dr. Khalegh Barati

Term 3, 2020

CVEN3101

ENGINEERING OPERATIONS AND CONTROL

Project Crashing

Project crashing can be defined as a schedule compression technique in which

cost and schedule tradeoffs are made to determine how to obtain the greatest

amount of compression for the least incremental cost (PMBOK, 4th ed.).

As a compression technique, project crashing concentrates on the project

schedule to accelerate the project's completion date.

Project crashing is common in practice and is conducted whenever project is

required to be completed earlier than its original scheduled time.

Project Crashing Methods

• Applying multiple-shifts work

• Working extended hours (overtime)

• Allocating additional resources

• Offering incentive payments for early completion and productivity improvement

• Working on weekends and public holidays

• Outsourcing and subcontracting

• Using advanced technologies

• Using materials with faster installation methods

• Using alternative construction methods

Project Costs

There are two types of costs associated with a

construction project.

Direct cost:

Direct costs are directly associated with project

activities such as costs of material, labor, and

equipment. If the pace of activities is increased in

order to compress the project completion time,

direct costs typically increase as more resources

must be allocated to accelerate the pace.

Indirect cost:

Indirect costs are typically overhead costs that

are not specifically associated with specific

project activity such as office space,

administrative and safety staff, and taxes. Indirect

costs are relatively steady over time, and they

decrease as the total project duration reduces.

Crashing Algorithm

⚫ Normal duration of activities entails the least project cost. This duration is

considered for project scheduling.

⚫ With expenditure of additional resources, it is generally possible to

accomplish the activities in a shorter duration.

⚫ Crash duration is the minimum possible duration of an activity, when its cost

is the highest.

⚫ Due to different technological, environmental, and logical reasons, it

is not possible to shorten an activity below the crash duration even

by spending more money and resources.

Crashing Algorithm

• Draw the network and conduct forward and backward analysis with the normal

activity durations.

• Obtain the critical path(s).

• Calculate activities slope.

Slope = crash cost – normal cost normal time – crash time

• Choose the activity on the critical path which has the least slope to crash.

Crash that activity till either another path becomes critical or the activity is fully

crashed.

• Determine the most economical set of activities to be crashed to reduce the

durations of all critical paths.

• No further crashing is possible when at least one critical path cannot be

shortened anymore (all its activities have reached their crash time).

Example

For a project with the activities specified in the table below, find the minimum

project duration and its associated crash cost.

Activity Predecessor Normal time (day) Normal cost ($) Crash time (day) Crash cost ($)

A - 4 100 3 200

B - 7 280 5 520

C - 3 50 2 100

D A 5 200 3 360

E C 2 160 2 160

F A 10 230 8 350

G B, D, E 7 200 5 480

H C 2 100 1 200

Example

Solution:

0 4 A(4) 0 4

0 3 C(3) 3 6

0 7 B(7) 2 9

4 14 F(10)

6 16

4 9 D(5)

4 9

3 5 E(2)

6 9

3 5 H(2)

14 16

9 16 G(7)

9 16

16 16 FINISH(0) 16 16

0 0 START(0) 0 0

Paths: A-F, A-D-G, B-G, C-E-G, C-H

Example Normal project cost = 100 +250 + 50 + 200 + 160 + 230 + 200 + 100 = 1,320$

Slope = crash cost – normal cost normal time – crash time

Activity A B C D E F G H

Slope 100 120 50 80 X 60 140 100

Paths Activities Path

Duration

A B C D E F G H

ADG 100 80 140 16

AF 100 60 14

BG 120 140 14

CEG 50 X 140 12

CH 50 100 5

Maximum

possible

crash

1 2 1 2 0 2 2 1

Path ADG is selected as it is the only critical path. Activity D is crashed for 2

days as it has the minimum cost slope in this path.

Example E

x tr

a C

o s t In

c re

m e

n t

Crash D by 2 days

11 12 13 14 15 16

160

800

700

600

500

400

300

200

100

Example

Table will be updated considering the changes in the previous step.

Paths Activities Path

Duration

A B C D E F G H

ADG 100 X 140 14

AF 100 60 14

BG 120 140 14

CEG 50 X 140 12

CH 50 100 5

Maximum

possible

crash

1 2 1 0 0 2 2 1

Options for project crash Cost slope Maximum crash duration

A, B 220 1

A, G 240 1

F, G 200 2

There is also another option. We can crash A and G for one day and relax D for

1 day to save cost, because both A and G are on path ADG.

Cost slope = 240 – 80 = 160

Example E

x tr

a C

o s t In

c re

m e

n t

Project

Duration 11 12 13 14 15 16

160

800

700

600

500

400

300

200

100 Crash D by 2 days

320 P3

Crash A&G and relax D

Example

Table will be updated considering the changes in the previous step.

Paths Activities Path

Duration

A B C D E F G H

ADG X 80 140 13

AF X 60 13

BG 120 140 13

CEG 50 X 140 11

CH 50 100 5

Maximum

possible

crash

0 2 1 1 0 2 1 1

Cost slope Maximum crash duration

F, G 200 1

D, F, B 260 1

Options for project crash

F and G are selected to be crashed as they have less cost slope.

Example E

x tr

a C

o s t In

c re

m e

n t

Project

Duration 11 12 13 14 15 16

160

800

700

600

500

400

300

200

100 Crash D by 2 days

320 P3

Crash A&G and relax D

Crash F&G by 1 day

520

Example

Table will be updated considering the changes in the previous step.

Paths Activities Path

Duration

A B C D E F G H

ADG X 80 X 12

AF X 60 12

BG 120 X 12

CEG 50 X X 10

CH 50 100 5

Maximum

possible

crash

0 2 1 1 0 1 0 1

Options for project crash

Cost slope Maximum crash duration

D, F, B 260 1

Example E

x tr

a C

o s t In

c re

m e

n t

Project

Duration 11 12 13 14 15 16

160

800

700

600

500

400

300

200

100 Crash D by 2 days

320 P3

Crash A&G and relax D

Crash B,D&F by 1 day

520

780

Crash F&G by 1 day

Example

Table will be updated considering the changes in the previous step.

Paths Activities Path

Duration

A B C D E F G H

ADG X X X 11

AF X X 11

BG 120 X 11

CEG 50 X X 10

CH 50 100 5

Maximum

possible

crash

0 1 1 0 0 0 0 1

As there is at least one critical path which cannot be further crashed, the minimum project

duration will be 11 days with 780$ crash cost.

Example Summary

Project Duration (day) Project Cost ($) Crashed Activities

16 1,320 -

15 1,400 D

14 1,480 D

13 1,640 A and G – D relaxed

12 1,840 F and G

11 2,100 B, D, and F

Resource Optimization

Any thing that is used to carry out an activity such as material, equipment, labor, and money is counted as a resource.

Resource types

Non-consumable resources

• Equipment

• Labour

Consumable resources

• Money

• Material

Resource optimization techniques:

• Resource Leveling

• Resource Smoothing

Resource Leveling

• Resource leveling is a technique in which start and finish dates of activities

are adjusted based on resource constraints with the goal of balancing

demand for resources with the available supply. Resource leveling actually

changes the project scheduling to resolve resource over-allocations.

• Resource leveling is applied to a schedule that has already been analyzed

by the critical path method.

• This technique is used to adjust a project schedule if shared resources are

only available at certain times, or in limited quantities.

• Resource leveling is often used to correct resource over-allocations and will

often change the critical path.

• The network diagram should be recreated after resource leveling to assess

the updated critical path.

Resource Leveling

Resource Smoothing

• Resource smoothing is one of the project management tools used in

the resource optimization techniques.

• Resource smoothing tries to have the minimum possible fluctuation in

resource demand causing minimum hiring/firing.

• In resource smoothing, as opposed to resource leveling, the project’s critical

path is not changed, and the completion date is not delayed. In other words,

activities may only be delayed within their free and total float.

• Resource smoothing is performed after resource leveling to do the resource

allocation as smooth as possible.

Resource Leveling vs Resource Smoothing

• In resource leveling the project completion date may change while in

smoothing it does not change.

• In resource leveling the critical path changes (generally increases) while in

resource smoothing it does not, and activities can be delayed within their float.

• In resource leveling resources are the main constraint while in resource

smoothing project completion date is the main constraint.

• Resource leveling is typically used when resources are over allocated.

Resource smoothing is used when resources are unevenly allocated.

• Resource leveling can be applied to activities on the critical path while in

resource smoothing you do not touch activities on the critical path.

• Generally, resource smoothing is usually performed after the resource

leveling.

Resource Leveling vs Resource Smoothing

Heuristic Resource Smoothing Method

Heuristic method can be used for minimizing resource use fluctuations during

the project construction.

Heuristic procedure for resource smoothing

• Calculate the total usage of resources = Σunit period usage

• Calculate the average resource usage = Σusage/utilization period

• Shift non-critical activities within their FF first, then their TF to decrease the

peaks and raise the troughs

• Revise the activities float

• Aggregate the resources in each time period and calculate the variance.

Variance = Σ(resource usage - average resource usage)2

• Repeat this process to achieve the minimum possible variance.

Example

The activities involved in the construction of a certain project are given in table

below. Using heuristic resource smoothing method to have the minimum

hiring/firing of labors.

Activity Predecessor Duration (day) Labour per day

A - 5 5

B A 7 8

C A 6 5

D A 4 3

E C 3 6

F C 5 3

G D 5 6

H B 4 5

I F, G 4 3

J E, I, H 3 6

Example

0 5 A(5)

0 5

11 14 E(3)

17 20

9 14 G(5)

11 16

11 16 F(5)

11 16

16 20 I(4)

16 20

5 9 D(4)

7 11

5 11 C(6)

5 11

20 23 J(3)

20 23

5 12 B(7)

9 16

12 16 H(4)

16 20

Example

Activity Duration ES EF LS LF TF FF

A 5 0 5 0 5 0 0

B 7 5 12 9 16 4 0

C 6 5 11 5 11 0 0

D 4 5 9 7 11 2 0

E 3 11 14 17 20 6 6

F 5 11 16 11 16 0 0

G 5 9 14 11 16 2 2

H 9 12 16 16 20 4 4

I 4 16 20 16 20 0 0

J 3 20 23 20 23 0 0

Example

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

A(5)

B(8)

C(5)

D(3)

E(6)

F(3)

G(6)

H(5)

I(3)

J(6)

Sum 5 5 5 5 5 16 16 16 16 19 19 23 20 20 8 8 3 3 3 3 6 6 6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Example

Total usage of resources = Σunit period usage = 236

Average resource usage = Σusage/utilization period = 236/23 = 10.26

Variance = Σ(resource usage - average resource usage)2

= (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (16-10.26)2 +

(16-10.26)2 + (16-10.26)2 + (16-10.26)2 + (19-10.26)2 + (19-10.26)2 + (23-10.26)2

+ (20-10.26)2 + (20-10.26)2 + (8-10.26)2 + (8-10.26)2 + (3-10.26)2 + (3-10.26)2 +

(3-10.26)2 + (3-10.26)2 + (6-10.26)2 + (6-10.26)2 + (6-10.26)2

= 1050.45

Example

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

A(5) B(8) C(5) D(3) E(6) F(3) G(6) H(5) I(3) J(6)

5 5 5 5 5 16 16 16 16 19 19 23 20 20 8 8 3 3 3 3 6 6 6

5 5 5 5 5 16 16 16 16 19 19 17 14 14 8 8 3 9 9 9 6 6 6

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Example

Variance = Σ(resource usage - average resource usage)2

= (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (16-10.26)2 +

(16-10.26)2 + (16-10.26)2 + (16-10.26)2 + (19-10.26)2 + (19-10.26)2 + (17-

10.26)2 + (14-10.26)2 + (14-10.26)2 + (8-10.26)2 + (8-10.26)2 + (3-10.26)2 + (9-

10.26)2 + (9-10.26)2 + (9-10.26)2 + (6-10.26)2 + (6-10.26)2 + (6-10.26)2

= 138.34 + 131.80 + 152.77 + 45.43 + 27.98 + 10.22 + 52.71 + 4.77 + 108.89

= 672.91

Example

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

A(5)

B(8)

C(5)

D(3)

E(6)

F(3)

G(6)

H(5)

I(3)

J(6)

5 5 5 5 5 16 16 16 16 19 19 23 20 20 8 8 3 3 3 3 6 6 6

5 5 5 5 5 16 16 16 16 19 19 17 14 14 8 8 3 9 9 9 6 6 6

5 5 5 5 5 16 16 16 16 13 13 17 9 9 9 9 8 14 14 14 6 6 6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Example

Variance = Σ(resource usage - average resource usage)2

= (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (5-10.26)2 + (16-10.26)2

+ (16-10.26)2 + (16-10.26)2 + (16-10.26)2 + (13-10.26)2 + (13-10.26)2 + (17-

10.26)2 + (9-10.26)2 + (9-10.26)2 + (9-10.26)2 + (9-10.26)2 + (8-10.26)2 + (14-

10.26)2 + (14-10.26)2 + (14-10.26)2 + (6-10.26)2 + (6-10.26)2 + (6-10.26)2

= 138.34 + 131.80 + 15.02 + 45.43 + 27.98 + 6.35 + 5.11 + 41.52 + 108.89

= 520.44

Earned Value Management

Assume you are the project manager of a large construction project. The

project is midway, and you need to prepare a progress report for the client.

In your report, you need to answer to the following questions:

1) Is the project on schedule? If not, what is the variance?

2) Is the project on budget? If not, what is the variance?

3) When is the project completion date?

4) Based on the current progress, what is the cost of project at its completion?

5) How much is the cost overrun of project at its completion?

Earned Value Management

Earned value management (EVM) compares the planned amount of work with

what has actually been completed, to determine if cost, schedule, and work

accomplished are progressing as planned.

EVM analyses:

• Measure a project’s progress,

• Forecast its completion date and final cost,

• Provide schedule and budget variances along the way.

Earned Value Management Terms

Planned value (PV) is the portion of the approved cost estimate planned to be

spent on an activity during a given period.

It is also called the budgeted cost of work scheduled (BCWS).

Actual cost (AC) is the total costs (direct and indirect) incurred in completing

work on an activity during a given period.

It is also called actual cost of work performed (ACWP).

Earned value (EV) is an estimate of the value of the work actually completed

Also called the budgeted cost of work performed (BCWP).

EV based on original planned project costs and the rate at which the team is

completing work on the project to date.

Cost Variance

Cost Variance (CV) represents the cost status of the project. It can be calculated

as the difference between the value of the work accomplished (EV) and the

cost of accomplishing the work (AC).

CV = EV -AC

CV<0 : project is over budget

CV>0 : project is under budget

CV=0 : project is at exact budget

Schedule Variance

Schedule Variance (SV) represents the schedule status of the project. It can be

calculated as the difference between the amount of work actually accomplished

(EV) and the amount of work planned to be accomplished (PV).

SV = EV – PV

SV<0 : Task is behind schedule

SV>0 : Task is ahead of schedule

SV=0 : Task is on schedule

CV vs SV

Cost Variance looks at the Y axis

Any point above the BCWS is over

cost which is unfavorable.

Any point below is favorable.

Schedule variance looks at the X axis

Any point left of the BCWS is ahead

of spending schedule in the time

dimension which is favorable.

Any point right is unfavorable.

time

CV vs SV

Example

Cost Performance Index

Cost Performance Index (CPI) is a measure of the cost efficiency of budgeted

resources, expressed as a ratio of earned value to actual cost. It compares the

value of the work completed compared to the actual cost spent.

CPI = EV/AC

CPI<1 : Task is over budget

CPI>1 : Task is under budget

CPI=1 : Task is at exact budget

Schedule Performance Index

Schedule Performance Index (SPI) is a measure of schedule efficiency,

expressed as the ratio of earned value to planned value. It shows how project

is progressing compared to the planned project schedule.

SPI = EV/PV

SPI<1 : Task is behind schedule

SPI>1 : Task is ahead of schedule

SPI=1 : Task is on schedule

Project Performance Measures

Cost Schedule Index

Cost Schedule Index (CSI) measures the project's overall efficiency and

indicates how likely a project that is deviating from baselines is to recover.

CSI = CPI x SPI

CSI<1 : Over budget schedule combination (indicative of a problem)

CSI>1 : Under budget schedule combination

CSI=1 : Follows overall plan

The further CSI is from 1.0, the less likely project recovery becomes.

Example

You have a project to be completed in 12 months, and the budget of the project

is $100,000. 6 months have passed, and $60,000 has been spent, but upon

closer review, you find that only 40% of the work has been completed.

Calculate CPI, SPI, and CSI variables and determine the situation of the project

in terms of cost and time.

Solution:

Actual Cost (AC) = $60,000

Planned Value (PV) = 50% of $100,000 = $50,000

Earned Value (EV) = 40% of $100,000 = $40,000

Cost Performance Index (CPI) = EV / AC = $40,000/$60,000 = 0.67

So, project is over budget.

Schedule Performance Index (SPI) = EV / PV = $40,000 /$50,000 = 0.8

So, project is behind schedule

Cost Schedule Index (CSI) = CPI x CSI = 0.67 x 0.8 = 0.54

So, project is over budget schedule combination.

Estimate at Completion

Estimate at Completion (EAC) is the expected budget at the end of the project

given the variances that have already taken place.

ETC = (BAC - EV)/CPI

EAC = ETC + AC

where:

ETC = Estimated cost to complete

BAC = Budget at completion

EV = Earned value

CPI = Cost performance index

EAC = Estimated cost at completion

AC = Amount expended to date (actual cost)

Estimate at Completion

Example

You are three months into the five-month bathroom remodeling project. The

original budget (BAC) was $1,500 and you have completed approximately 40%

of the work. Actual costs to-date have been $900. Estimate the cost of project

at completion.

Solution:

EV = 40% of $1,500 = $600

AC = $900

BAC = $1,500

CPI = EV/AC = $600/$900 = 0.67

ETC = (BAC - EV)/CPI = ($1,500 - $600)/0.67 = $1,350

EAC = ETC + AC = $1,350 + $900 = $2,250

Videos

https://www.youtube.com/watch?v=sAZZ5av9kk0

https://www.youtube.com/watch?v=5jPOaGOaFxg

https://www.youtube.com/watch?v=O9NjG6h4bFk

Basic Earned Value Definitions and Terminology

https://www.youtube.com/watch?v=NjihSDb-uaA

Resource Leveling

https://www.youtube.com/watch?v=K01PxmyC6Vo https://www.youtube.com/watch?v=YU-sdxfOwr4

Cost-Time Trade Off for Project Crashing

https://www.youtube.com/watch?v=5jPOaGOaFxg

https://www.youtube.com/watch?v=5jPOaGOaFxghttps://www.youtube.com/watch?v=O9NjG6h4bFk

https://www.youtube.com/watch?v=NjihSDb-uaA

https://www.youtube.com/watch?v=K01PxmyC6Vo

https://www.youtube.com/watch?v=YU-sdxfOwr4

Summary

Project Crashing

• Crashing Methods

• Project Costs

• Crashing Algorithm

Resource Optimisation

• Resource Types

• Resource Optimisation Techniques

• Resource Leveling

• Resource Smoothing

• Levelling vs Smoothing

• Heuristic Resource Smoothing Method

Earned Value Management

• Planned Value (PV)

• Actual Cost (AC)

• Earned Value (EV)

• Cost Variance (CV)

• Schedule Variance (SV)

• Cost Performance Index (CPI)

• Schedule Performance Index (SPI)

• Estimate at Completion (EAC)