SENSITIVITY ANALYSIS OF COST-TIME RELATIONSHIP ON THE CHARACTERISTICS OF GANTT CHART

SENSITIVITY ANALYSIS OF COST-TIME RELATIONSHIP ON THE CHARACTERISTICS OF GANTT CHART

ABSTRACT

This research work entails the application of project management method of analyzing the cost-time relationship of a project. To determine the normal cost, a project bill of quantities for a specific project was obtained. Its corresponding project duration for all the activities to be carried was also calculated and presented on Microsoft Gantt chart. Project duration was computed based on time required to carry out an activity including gang balancing. However, only one improvement was carried out, because of the size of the project in order to avoid over manning of the activities. The total project time was shortened from the activities with the least cost slope unit continuously to obtain an optimum cost lesser than the initial cost of project. The crashed time was re-presented on Microsoft Gantt chart. The work therefore recommends that shortening of project duration should be used whenever delay sets in.

CHAPTER ONE

1.0       INTRODUCTION                                                                  

1.1       STUDY BACKGROUND

The reason for shortening of project duration occurs for many reasons such as expected date of project delivery, huge overhead costs, incentive contracts or simply unforeseen delays. These situations are common in practice and known as cost-time trade-off decision. Based on this understanding, the failure of a project can be caused by ineffectively plan, control and monitor. State that most failures of projects can be linked to ineffective planning and blind adherence to originally formulated plans regardless of how the environment has changed in the interim (Kharbanda& Pinto, 1996).

Research studies find out that the performance of construction project in project delivery depends to a large extent upon their production planning and control structures (Arditi, 1985; Mauricio & Carlos, 2002).

Controlling of time is one of the necessity goals of all the construction team. From the initial concept, the client interest mainly is the total time for the completion of the project. The client’s objective is to reduce the time required for the completion of each phases of the project. Time is of equivalent to gold. The significance of time in economy is what prompts the owner to use the words “time is of the essence” in a contract. Many stages are involved in the construction process wherebyproper timing can be directly controlled by the client. For the other elements, the owner can only control it indirectly.

For the construction phase, the contractor is one in charge to directly control it over the time required. The client can specify the duration for the contract which can be based on the weather considerations, economics, or some other reasons. After development of the schedule, the contractor will look for ways to shorten, or “compress” the construction time. The initial schedule’s duration may be longer than the time required in the contract and adjustments must be made to satisfy contract provisions. The use of schedule of network will be adopted by the contractor for effective monitoring and control of the project time.However, the project duration of the project is usually a condition of the contract between the owner and the contractor. The contractor uses the network schedule for effective control of the project. The contractor may want the project delivery early for the advantage of payment of bonus, to beat against working in raining season and to have more resources for other projects. Also, the contractor may fall behind schedule during construction, requiring action to get back on track. In these instances, the construction costs will minimized with Cost Slope Analysis by considering both the direct and indirect costs, under crashing and normal duration. Normally, it provides a systematic way to determine the activities with the most cost and time efficient to be shortened. When shortening any task, this will increase the direct cost of the task, thereby decreasing the overall project duration. By taking of this decision could save on indirect cost which will make an increasein the project’s total profit.

The Optimum Cost-Time area on the Cost-Time slope graph, crashing time can be determined by the project Manager which can logically determine a maximum profit in time. However, marked diminishing return will be achieved from the least cost required, and by crashing the project duration. The Cost Slope Analysis can be used to discover which critical path activities would be the most cost and time efficient to be reduced and the total crashed of the project duration will be used to determine the total profit.(Larson & Gray, 2011).

Cost Slope Analysis is a technique of project management which is used to determine;

(a) The effective cost efficient Critical Path Activities to be reduced,

(b) The Optimum Cost-Time Point, showing the accurate point for a Cost to Time tradeoff, marking a crashing schedule’s point of maximum profit.(Larson & Gray, 2011) The technique is use to determine the Critical Path Activities and their relationship and to identify the four Cost -Slope Analysis Index:

1. Indirect Cost and Duration (The Normal and Crash Mode).
2. Direct Duration and Cost (The Normal and Crash Mode).
3. Maximum crash time allowed per Critical Path Activity in respect to technical and resources problem.
4. Financial risks, including but not limited to: late delivery penalties fees, early delivery incentives (faster time-to-market benefit) etc.

Cost Slope Analysis’s goal is to find the “Optimum Cost-Time Point” (OCTP) on the Project Cost-Duration Graph (Larson & Gray, 2011). Assuming;

1. There is a linear relationship indicating that reduction of the critical path activities would result in a higher direct cost and total cost, and
2. The higher the project duration the higher indirect cost and total cost.

1.2       STATEMENT OF PROBLEM                

The purpose of this report is to carry out the procedures to reduce the total time spent on a selected project by using of the techniques and tools in project management called the Cost-Time slope relationship. The methodology to establish the project duration that will result in the lowest time and construction costs will be done. The sensitivity to this changes/adjustment on the MS Project Gantt Chart will be highlighted.

1.3       AIM AND OBJECTIVES   

1.3.1    Aim

The aim of this research work is to shorten the construction time of a selected project. It will examine the cost-time relationship adjustment of characteristic of Microsoft Gantt chart, in order to reduce the project time.

1.3.2    Objectives:

With a view to realizing the aim of this research work, the following objectives will be

• To carry out project planning for a selected project.
• To shorten the construction time using the cost-time slope.
• To find out the effect of such adjustment on the Microsoft Gantt Chart project schedule already prepared.

1.4       NEED FOR THE STUDY

• This research work was necessitated due to the increase in time for construction and this call for introducing techniques for planning of project work to aid reduction on project duration.
• This work will therefore provide a strategic way of achieving the client’s objective by working within the cost, time and quality.

 1.5       SCOPE AND LIMITATION

The scope of this research work covers the reduction in construction time by analyzing the cost time relation by making use of overtime in addition to the normal working hour. This research work would be limited to the determination of cost-time slope using Gantt chart of project schedule due to the limited time for this research work.

1.6       RESEARCH METHODOLOGY                                                                          

The information of this work is based on theoretical and empirical in approach. The theoretical aspects involve the use of related journals and literature. The empirical part involve the analyzing the data obtain from the working drawings with the priced bill of quantity is use in data collection and demonstration. The methodology that is been adopted for this research work would include the use of Microsoft project (Gantt chart) as a computer base program to plan for the project.

 CHAPTER TWO

2.0       LITERATURE REVIEW                                                  

2.1       SENSITIVITY ANALYSIS

Sensitivity Analysis is the study of how the uncertainty in the output of a model can be assigned to different sources of uncertainty in the model input (Kolb 1993).  The Sensitivity Analysis is the precondition for proposed building for diagnose and in any field where models are used. (Rabitz 1999), knowing that the theoretical methods are sufficiently enough for effective performance of the modeling with Sensitivity Analysis. Controlling of time is one of the main objectives of all project team. From the onset, the owner of the project is interested in the time it takes for the completion of the project. The client’s goal is to reduce the time require for each stages of the project, from inception to completion of the project. (Chan & Kumaraswamy, 1997) “That a project is considered successful if it is completed on time, within budget and to the quality standard specified by the client at beginning of the project”.