Chapter17 Projectmanagement 2

Project Management
Chapter 17
There are often ...
• Deadlines for finishing projects

– (Olympic stadium, dormitories, etc.)
• Penalty or overhead costs if project

is late
• Competitive pressures
– Competitors, slowing demand
Project Crashing
• Projects will sometimes have deadlines that

are impossible to meet using normal
procedures
• By using exceptional methods it may be
possible to finish the project in less time than
normally required
• However, this usually increases the cost of
the project
• Reducing a project’s completion time is called
crashing
Time-Cost Trade-Offs: Crashing
 In many projects, it is possible to reduce the length
of a project by injecting additional resources. The
impetus to shorten projects may reflect efforts to
avoid late penalties, or/ to take advantage of
monetary incentives for timely completion of a
project, or/ to free resources for use on other
projects. This is called crashing.
• Crash – briefly, shortening activity duration
Time-Cost Trade-Offs: Crashing
• Crashing
– Shortening activity durations
• Typically, involves the use of additional funds to
support additional personnel or more efficient
equipment, and the relaxing of some work
specifications
– The project duration may be shortened by
increasing direct expenses, thereby realizing
savings in indirect project costs
Indirect costs
• Indirect costs are those overhead costs

that are not directly associated with
specific project activities such as office
space, administrative staff, and taxes.
Time-Cost Relationship
• Crashing costs increase as project duration

decreases
• Indirect costs associated with running the project
(such as facilities and equipment costs,
supervision, and labor and personnel costs)
increase as project duration increases
• Reduce project length as long as crashing costs
are less than indirect costs
Project Crashing
• Crashing a project involves paying more

money to complete a project more quickly.
• Since the critical path determines the length
of a project, it makes sense to reduce the
length of activities on the critical path.
• CP activities should be reduced until the
project is reduced to the desired length or you
are paying more per day than you save.
• If you have multiple CPs, they should be
shortened simultaneously.
Crashing Activities
Using the Critical Path
to Shorten a Project Schedule
• The main techniques for shortening schedules
– Shortening durations of critical activities/tasks by
adding more resources or changing their scope
– Crashing activities by obtaining the greatest
amount of schedule compression for the least
incremental cost
• A 2 week task with one person working 50% could be
shortened to 1 week if the person is assigned 100% -
no increase in cost
• Or, a temporary worker could be hired to work in
parallel with the other worker to speed up the task (at
a cost)
Time-Cost Tradeoff Example D8
A 10 B 10 C 10
• ABC is critical path=30
Crash cost Crash

per week wks avail
A 500 2
B 800 3
C 5,000 2
D 1,100 2
A 10 B 10 C 10
Crash cost Crash

per week wks avail Cheapest way to gain 1
A 500 2 Week is to cut A
B 800 3
C 5,000 2
D 1,100 2
A9 B 10 C 10
Wks Incremental Total
Crash cost Crash Gained Crash $ Crash $
1 500 500
per week wks avail
A 500 1
B 800 3
C 5,000 2
D 1,100 2
A9 B 10 C 10
1 500 500
per week wks avail
A 500 1
B 800 3 Cheapest way to gain 1 wk
C 5,000 2 Still is to cut A
D 1,100 2
A8 B 10 C 10
per week wks avail 1 500 500
2 500 1,000
A 500 0
B 800 3
C 5,000 2
D 1,100 2
A8 B 10 C 10
2 500 1,000
A 500 0
C 5,000 2 is to cut B
D 1,100 2
A8 B9 C 10
2 500 1,000
A 500 0 3 800 1,800
B 800 2
C 5,000 2
D 1,100 2
A8 B9 C 10
2 500 1,000
A 500 0 3 800 1,800
C 5,000 2 Still is to cut B
D 1,100 2
A8 B8 C 10
• Critical paths=26 ADC & ABC
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 1
C 5,000 2
D 1,100 2
A8 B8 C 10
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 1 To gain 1 wk, cut B and D,
C 5,000 2 Or cut C
Cut B&D = $1,900
D 1,100 2 Cut C = $5,000
So cut B&D
A8 B7 C 10
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 0 5 1,900 4,500
C 5,000 2
D 1,100 1
A8 B7 C 10
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 0 5 1,900 4,500
C 5,000 2 Can’t cut B any more.
Only way is to cut C
D 1,100 1
A8 B7 C9
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 0 5 1,900 4,500
C 5,000 1 6 5,000 9,500
D 1,100 1
A8 B7 C9
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 0 5 1,900 4,500
C 5,000 1 6 5,000 9,500
D 1,100 1 Only way is to cut C
A8 B7 C8
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 0 5 1,900 4,500
C 5,000 0 6 5,000 9,500
7 5,000 14,500
D 1,100 1
A8 B7 C8
2 500 1,000
A 500 0 3 800 1,800
4 800 2,600
B 800 0 5 1,900 4,500
C 5,000 0 6 5,000 9,500
7 5,000 14,500
D 1,100 1 No remaining possibilities to
reduce project length
• Now we know how much it A8 B7 C8

costs us to save any
number of weeks
• Customer says he will pay Gained Crash $ Crash $
$2,000 per week saved. 1 500 500
2 500 1,000
3 800 1,800
4 800 2,600
5 1,900 4,500
6 5,000 9,500
7 5,000 14,500
No remaining possibilities to
• Now we know how much it A8 B7 C8

costs us to save any
number of weeks
• Customer says he will pay Gained Crash $ Crash $
$2,000 per week saved. 1 500 500
• Only reduce 5 weeks. 2 500 1,000
3 800 1,800
• We get $10,000 from 4 800 2,600
customer, but pay $4,500 in 5 1,900 4,500
expediting costs 6 5,000 9,500
• Increased profits = $5,500 7 5,000 14,500
No remaining possibilities to
Crashing Decisions
• To make decisions concerning crashing

requires information about:
1. Regular time and crash time estimates for each
activity
2. Regular cost and crash cost estimates for each
activity
3. A list of activities that are on the critical path
• Critical path activities are potential candidates for
crashing
• Crashing non-critical path activities would not have
an impact on overall project duration
Normal and Crashing
• Normal times are “normal” in the same
sense as the most likely time estimate
used in PERT, and the only one in CPM
• Crash times result from an attempt to
expedite the activity by the application of
additional resources
• Crash: Expedite an activity, by applying
additional resources
– Specialized or additional equipment
– More people (e.g., borrowed staff, temps)
– More hours (e.g., overtime, weekends)
Project Crashing
• Crashing a project starts with using the normal

time to create the critical path
• The normal cost is the cost for completing the
activity using normal procedures
• If the project will not meet the required deadline,
extraordinary measures must be taken
• The crash time is the shortest possible activity
time and will require additional resources
• The crash cost is the price of completing the
activity in the earlier-than-normal time
Activity Cost-Time Tradeoff
Slope = (crash cost – normal cost)/(crash time – normal
time)
Cost
C* Crash Slope is cost to expedite per day
C Normal
D* D
Activity Time (Days)
Normal Time and Cost
vs. Crash Time and Cost
$7,000 –
$6,000 –
Crash cost
$5,000 – Crashed activity
Slope = crash cost per week

$4,000 –
$3,000 – Normal activity
Normal cost
$2,000 –
$1,000 –
Crash time Normal time
– | | | | | | |
0 2 4 6 8 10 12 14 Weeks
Example - Crashing
Using the following information, develop the optimal time cost solution.
Indirect costs are $ 1000 per day.
(a) Determine which activities are on the critical path, its length, and the
length of the other path
(b) Rank the critical activities in order of lowest crashing cost, and
datermine the number of days each can be crashed.
(c) Determine the critical path after each reduction by shortening the
project.
Immediate Crash Cost per day to

Activity Normal time
predecessor time crash
a - 6 6
c - 10 8 $300
d c 5 4 700
b a 4 1 500
e d 9 7 600
f b,e 2 1 800
(a) Determine the critical path.
2
f
4
d
Indirect costs: $1,000 / day 2
(that is, the entire project saves f
$1000 if it finishes one day earlier,
$2000 if it finishes two day earlier, 4
and so on.)
d
Activity Normal Crash (min) Available time Cost to Crash

time time (crash-normal) [$/day]
[days] [days] [days]
a 6 6 - -
b 10 8 2 500
c 5 4 1 300
d 4 1 3 700
e 9 7 2 600
f 2 1 1 800
2
1. Determine Critical Path f
Path Length
4
a-b-f 18
d
c-d-e-f 20 (critical path)
2. Rank activities on CP in Activity Normal

time
Crash
(min)
Available
time
Cost to
Crash
[days] time (crash- [$/day]
order of lowest crashing cost [days] normal)
[days]
a 6 6 - -
Activity Cost per day to crash Available days
b 10 8 2 500
c 300 1
e 600 2 c 5 4 1 300
d 700 3 d 4 1 3 700
f 800 1 e 9 7 2 600
f 2 1 1 800
Crash activity c by 1 day: 2. Rank activities on CP in
cost $300 < $1,000 (CP=19 order of lowest crashing cost
days)
(cannot crash c anymore) Activity Cost per day to crash Available days
c 300 1
e 600 2
d 700 3
f 800 1
2
f
4
4
d
Crash activity e by 1 day: 2. Rank activities on CP in
cost $600 < $1,000 (CP=18 order of lowest crashing
days) cost
(may crash activity e by 1 more
day) Activity Cost per day to crash
Available days
c 300 1
e 600 2
d 700 3
f 800 1
2
f
4
• Both paths are now critical.
• Have to crash both in order to
4
shorten project.
d
Both paths are now critical. 2
Have to crash both in order to f
shorten project.
4
Remaining activities d
Path Activity Cost per day to crash Available
days
a-b-f a - -
b 500 2
f 800 1
c-d-e-f c - -
e 600 1
d 700 3
f 800 1
Crash activity f (is on both paths) by 1 day:
cost = $800 < $1,000 (CP=17 days)
Remaining activities
Crash activity f (is on Path Activity Cost per day to crash
both paths) by 1 day: Available days
a-b-f a - -
cost $800 < $1,000 b 500 2
(CP=17 days) f 800 1
c-d-e-f c - -
e 600 1
d 700 3
f 800 1
2 1
f
4
d
Both paths are still critical. 1
Have to crash both in order to f
shorten project.
4
Remaining activities d
Path Activity Cost per day to crash Available days
a-b-f a - -
b 500 2
f - -
c-d-e-f c - -
e 600 1
d 700 3
Crash activity b by 1f day: cost $500 AND
- -
Crash activity e by 1 day: cost $600
Total cost: $1,100>$1,000 (indirect costs) =>DONE!
Length after crashing
Path\crash n=0 1 2 3
a-b-f 18 18 18 17
c-d-e-f 20 19 18 17
Activity Crashed c e f
Cost 0 ($300) ($600) ($800)
Savings 0 $1,000 $1,000 $1,000
Total 0 $700 +$400 +$200 = $1,300
Observations
• Cost of crashing becomes more and

more expensive as cheapest options
are used up
• There is a limit to how far a project can

be crashed.
• Crashing non-critical activities is

pointless
Crashing: Procedure
• General procedure:
1. Crash the project one period at a time
2. Crash the least expensive activity that is on the critical
path
3. When there are multiple critical paths, find the sum of
crashing the least expensive activity on each critical
path
• If two or more critical paths share common
activities, compare the least expensive cost of
crashing a common activity shared by critical paths
with the sum for the separate critical paths
EXERCISE
• Costs for a project are $12,000 per week for as long as the
project lasts. The project manager has supplied the cost and
time information shown. Use the information to
a) Determine an optimum crashing plan.
b) Summarize the total costs for the plan.
EXERCISE- SOLUTION
Step 1: Compute path lengths and identify the critical path:
Step 2: Rank critical activities according to crash costs:

Activity b should be shortened one week since it has the lower
crashing cost. This would reduce indirect costs by $12,000 at a cost
of $3,000, for a net savings of $9,000.
13
2
EXERCISE- SOLUTION
Step 3: Rank activities by crashing costs on the two critical
paths: At this point, paths a-b and e-f would both have a length of 23
weeks, so both would be critical.
Choose one activity (the least costly) on each path to crash: b

on a-b and f on e-f, for a total cost of $4,000 + $2,000 = $6,000
and a net savings of $12,000 − $6,000 = $6,000.
13 12
2 1
7
0
EXERCISE- SOLUTION
Step 4: Check to see which path(s) might be critical:
a-b and e-f would be 22 weeks in length, and c-d would still be 19 weeks.
Step 5: Rank activities on the critical paths:
Crash b on path a-b and e on e-f for a cost of $4,000 + $6,000
= $10,000, for a net savings of $12,000 − $10,000 = $2,000.
13 12 11
2 1 0
14
2 7
0
EXERCISE- SOLUTION
Step 6: Check to see which path(s) might be critical:
Paths a-b and e-f would be 21 weeks in length, and c-d would still be 19 weeks.
Step 7: At this point, no further improvement is

possible: Paths a-b and e-f would be 21 weeks in length, and one activity from each path
would have to be shortened. This would mean activity a at $11,000 and e at $6,000
for a total of $17,000, which exceeds the $12,000 potential savings in costs.
13 12 11
2 1 0
14
2 7
0
EXERCISE- SOLUTION
b) Summarize the total costs for the plan.
The following table summarizes the results, showing the length of
the project after crashing n weeks:
A summary of costs for the preceding schedule would look like

this: * Total Cost = Cumulative Crashing Cost + Indirect Cost
No crash
Crash: b
Crash: b, f
Crash: b, e
Solved Problem
Your company has just received an order from a good customer for
a specially designed electric motor. The contract states that, starting
on the thirteenth day from now, your firm will experience a penalty of
$100 per day until the job is completed. Indirect project costs amount
to $200 per day. The data on direct costs and activity precedent
relationships are given in Table 1.
a. Draw the project network diagram.

b. What completion date would you recommend?
Solved Problem
TABLE 1 | ELECTRIC MOTOR PROJECT DATA

Activity Normal Normal Crash Crash Immediate
Time Cost Time Cost ($) Predecessor(s)
(days) ($) (days)
A 4 1,000 3 1,300 None
B 7 1,400 4 2,000 None
C 5 2,000 4 2,700 None
D 6 1,200 5 1,400 A
E 3 900 2 1,100 B
F 11 2,500 6 3,750 C
G 4 800 3 1,450 D, E
H 3 300 1 500 F, G
Solved Problem
SOLUTION
a. The network diagram is shown below. Keep the following points
in mind while constructing a network diagram.
1. Always have start and finish nodes.

2. Try to avoid crossing paths to keep the diagram simple.
3. Use only one arrow to directly
connect any two nodes. A D
4 6
4. Put the activities with no G Finish
predecessors at the left 4
and point the arrows Start

B
7
E
3
H
3
from left to right.
5. Be prepared to revise
C F
the diagram several 5 11
times before you come
up with a correct
and uncluttered diagram.
Solved Problem
b. With these activity times, the project will be completed in 19 days
and incur a $700 penalty. Using the data in Table 1, you can
determine the maximum crash-time reduction and crash cost per
day for each activity. For activity A
Maximum crash time = Normal time – Crash time =

4 days – 3 days = 1 day
Crash cost Crash cost – Normal cost CC – NC

= =
per day Normal time – Crash time NT – CT
$1,300 – $1,000
= = $300
4 days – 3 days
Solved Problem
Maximum Time Reduction

Activity Crash Cost per Day ($)
(days)
A 300 1
B 200 3
C 700 1
D 200 1
E 200 1
F 250 5
G 650 1
H 100 2
Solved Problem
TABLE 2 | PROJECT COST ANALYSIS
Stage Crash Time Resulting Project Project Crash Total Total Total
Activity Reduction Critical Duration Direct Cost Indirect Penalty Project
(days) Path(s) (days) Costs, Added Costs Costs Costs
Last ($) ($) ($) ($)
Trial ($)
0 — — C-F-H 19 10,100 — 3,800 700 14,600
1 H 2 C-F-H 17 10,100 200 3,400 500 14,200
2 F 2 A-D-G-H 15 10,300 500 3,000 300 14,100
B-E-G-H
C-F-H
Solved Problem
Table 2 summarizes the analysis and the resultant project duration
and total cost. The critical path is C–F–H at 19 days, which is the
longest path in the network. The cheapest activity to crash is H
which, when combined with reduced penalty costs, saves $300 per
day. Crashing this activity for two days gives
A–D–G–H: 15 days, B–E–G–H: 15 days, and C–F–H: 17 days
Crash activity F next. This makes all activities critical and no more
crashing should be done as the cost of crashing exceeds the
savings.
Application
Indirect project costs = $250 per day and penalty cost = $100
per day for each day the project lasts beyond day 14.
Project Activity and Cost Data

Normal Normal Crash Time Crash Immediate
Activity Time (days) Cost ($) (days) Cost ($) Predecessor(s)
A 5 1,000 4 1,200 —
B 5 800 3 2,000 —
C 2 600 1 900 A, B
D 3 1,500 2 2,000 B
E 5 900 3 1,200 C, D
F 2 1,300 1 1,400 E
G 3 900 3 900 E
H 5 500 3 900 G
Application
Direct cost and time data for the activities:
Project Activity and Cost Data
Activity Crash Cost/Day Maximum Crash Time (days)
A 200 1
B 600 2
C 300 1
D 500 1
E 150 2
F 100 1
G 0 0
H 200 2
Solution:
Original costs:
Normal Total Costs = $7,500
Total Indirect Costs = $250 per day  21 days = $5,250
Penalty Cost = $100 per day  7 days = $700
Total Project Costs = $13,450
Application
Step 1: The critical path is B–D–E–G–H , and the project
duration is 21 days.
Step 2: Activity E on the critical path has the lowest cost of
crashing ($150 per day). Note that activity G cannot be
crashed.
Step 3: Reduce the time (crashing 2 days will reduce the project
duration to 19 days) and re-calculate costs:
Costs Last Trial = $7,500

Crash Cost Added = $150  2 days = $300
Total Project Cost = $13,050
Note that the cost to crash ($250 per day) is less than
the combined indirect cost and the penalty cost per
day savings ($350).
Application
Step 4: Repeat until direct costs greater than savings
(step 2) Activity H on the critical path has the next lowest cost
of crashing ($200 per day).
(step 3) Reduce the time (crashing 2 days will reduce the
project duration to 17 days) and re-calculate costs:
Costs Last Trial = $7,500 + $300 (the added crash costs) = $7,800
Crash Cost Added = $200  2 days = $400
Total Project Cost = $12,750
Note that the cost to crash ($200 per day) is less than
the combined indirect cost and the penalty cost per
day savings ($350).
Application
(step 4) Repeat
(step 2) Activity D on the critical path has the next lowest
crashing cost ($500 per day).
(step 3) Reduce the time (crashing 1 day will reduce the project
duration to 16 days) and re-calculate costs:
Costs Last Trial = $7,800 + $400 (the added crash costs) = $8,200
Crash Cost Added = $500  1 day = $500
Total Project Cost = $12,900 which is greater than the last trial.
Hence we stop the crashing process.
Note that the cost to crash ($500 per day) is greater

than the combined indirect cost and the penalty cost
per day savings ($350).
Example - Crashing
Following project must be completed by Week 26
Activity Duration Predecessors Crashable Weeks Crash Cost/Week

A 6 None None
B 11 A 4 $700
C 14 A 3 $2,000
D 2 A None
E 4 B 1 $2,000
F 5 B 1 $1,000
G 6 C 1 $1,000
H 7 C 2 $2,000
I 3 D None
J 4 E None
K 4 F, G 2 $1,500
L 3 H, I 1 $2,500
AON Network Diagram for Project
E 17 21
E 6 17 L 22 26
L 10 21 S F E 21 25
E, 4
S F L 26 30
E 17 22 S F
B, 11
J, 4
L 21 26
S F
E 0 6 F,5
L 0 6 E 6 20 E 26 30
S F L 6 20 L 26 30
S F S F
START A, 6 C, 14 G, 6 K, 4 FINISH
E 20 26
E 0 0 L 20 26 E 30 30
L 0 0 S F L 30 30
S F S F
H, 7
D, 2 E 20 27
L 20 27
E 6 8 L, 3
S F E 27 30
L 22 24 L 27 30
S F I, 3 S F
E 8 11
L 24 27
S F
1. Write Down All Possible Paths
and Lengths of Time for Each
Path Length
ABEJ 25
ABFK 26
ACGK 30
ACHL 30
ADIL 14
2. Identify All Paths to be Shortened
Path Length
ABEJ 25
ABFK 26
ACGK 30 Critical Path
ACHL 30 Critical Path
ADIL 14
3. Find Lowest-Cost Way to Shorten
Critical Path(s)
Path Length
To CRASH, either:
ABEJ 25
1. Shorten C or
ABFK 26 2. Shorten {G or K}
and {H or L}
ACGK 30
ACHL 30
ADIL 14
• Shorten C by 3
weeks
Cost = 3×$2,000 =
$6,000
Update Lengths in Table
Path Length
ABEJ 25 Are we done?
ABFK 26
What are our
ACGK 3027 next cheapest
ACHL 3027 alternatives?
ADIL 14
To Crash Further
Shorten {G or K} and {H or L}
• Shorten Both G and H by 1 Week:

• Cost = $1,000 + $2,000 = $3,000
Update Lengths in Table
Path Length
ABEJ 25 Total Cost to Crash
= $6,000 + $3,000
ABFK 26
= $9,000
ACGK 302726
ACHL 302726
ADIL 14
Question
If the reduction in overhead per

week is $4000
How many more weeks should the
company try to crash the
project?

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Project Management

• Deadlines for finishing projects

• Penalty or overhead costs if project

• Projects will sometimes have deadlines that

• Indirect costs are those overhead costs

• Crashing costs increase as project duration

• Crashing a project involves paying more

Crash cost Crash

Crash cost Crash

• Now we know how much it A8 B7 C8

• Now we know how much it A8 B7 C8

• To make decisions concerning crashing

• Crashing a project starts with using the normal

Slope = crash cost per week

$3,000 – Normal activity

Immediate Crash Cost per day to

Activity Normal Crash (min) Available time Cost to Crash

2. Rank activities on CP in Activity Normal

• Cost of crashing becomes more and

• There is a limit to how far a project can

• Crashing non-critical activities is

Step 2: Rank critical activities according to crash costs:

Choose one activity (the least costly) on each path to crash: b

Step 7: At this point, no further improvement is

A summary of costs for the preceding schedule would look like

a. Draw the project network diagram.

TABLE 1 | ELECTRIC MOTOR PROJECT DATA

1. Always have start and finish nodes.

and point the arrows Start

Maximum crash time = Normal time – Crash time =

Crash cost Crash cost – Normal cost CC – NC

Maximum Time Reduction

1 H 2 C-F-H 17 10,100 200 3,400 500 14,200

2 F 2 A-D-G-H 15 10,300 500 3,000 300 14,100

A–D–G–H: 15 days, B–E–G–H: 15 days, and C–F–H: 17 days

Project Activity and Cost Data

Costs Last Trial = $7,500

Note that the cost to crash ($500 per day) is greater

Activity Duration Predecessors Crashable Weeks Crash Cost/Week

• Shorten Both G and H by 1 Week:

If the reduction in overhead per

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