Project Crashing and Cost of Crashing - Report Example

The table of activities Slack is =LS-ES or LF-EF ID Inspection Activities Time (hrs) ES EF LS LF Slack Preceding activity Personnel 1 Inspection review 4 0 4 0 4 0 - Team leader 2 Choosing inspection team 4 0 4 0 4 0 - Team members 3 Distribution of inspection resources 4 4 8 7 11 3 2 Team leader 4 Training of inspectors 4 4 8 4 8 0 2 Team members 5 Compliance based review 8 4 12 4 12 0 1 Team members 6 Verify SIC code 3 8 11 8 11 0 4 Team members 7 Verify emergence procedures 5 11 16 11 16 0 3,6 Team members 8 Verify processes 1 11 16 11 16 0 7 2 Engineers 9 Lead operator input 3 12 15 12 15 0 5 2 Engineers 10 Boilers 6 15 21 15 21 0 9 1Engineers& 2 Assist engineers 11 Mechanical integrity 5 16 21 16 21 0 8 3 Engineers 12 Pipe inspection 5 21 26 21 26 0 10 2 Engineers 13 Electrical installation inspection 5 21 26 21 26 0 11 1 Engineers & 3 Assist engineers 14 Storage tanks inspections 3 26 29 26 29 0 13 3 Engineers &3 Assist engineers 15 Capacity inspection 8 26 34 26 34 0 12 2Engineers 16 Documentation of failures 2 29 31 34 36 4 14 17 Documentation of areas of change 2 34 36 34 36 0 15 18 Final report 3 36 39 36 39 0 16,17 The critical path is A-E-F-J-L-O-Q-R The critical path = 4+8+3+6+5+8+2+3 = 39hrs Network before crashing Note that the network cells represents Project crashing and cost of crashing The project crashing will reduce the critical time and also reduce the appropriations available at each stage of the project therefore any cases of overspending are noticed and rectified. It also facilitates the control of funds and their usage. The appropriation is made for specific aspects of the project and to be used for that. This reduces the possibility of the project going beyond the agreed cost therefore the risk of financial damages as loss is lowered. The amount used has to concur with the amount shown on the network diagram for the project in order to facilitate payments. First crashing will begin with critical activities with maximum cost and if critical path changes then the second critical path will be crashed The current paths are Critical path (A) = 1-5-6-10-12-15-17-18 The critical path = 4+8+3+6+5+8+2+3 = 39hrs Non-critical paths Path B = 2-3-7-8-11-13-14-16-18 Path B duration 4+4+5+1+ 5+5+3+2+3= 32 hours Path C = 2-4-6-7-8-11-13-14-16-18 Path C duration = 4+4+3+5+1+5+5+3+2+3 = 35hours New path lengths and identify the critical path Activity Normal time(NT) Crash time(CT) A 4 3 B 4 4 C 4 4 D 4 4 E 8 8 F 3 3 G 5 5 H 1 1 I 3 2 J 6 4 K 5 4 L 5 5 M 5 3 N 3 3 O 8 6 After crashing the activities duration paths will be Path (A) = 1-5-9-10-12-15-17-18 Path (A) = 4+8+2+4+5+6+2+3 = 34hrs Non-critical paths Path B = 2-3-7-8-11-13-14-16-18 Path B duration 4+4+5+1+ 4+3+3+2+3= 29 hours Path C = 2-4-6-7-8-11-13-14-16-18 Path C duration = 4+4+3+5+1+4+3+3+2+3 = 32hours The critical path remains but it reduces to 34hours. Cost of crashing Inspection Cost Activity Personnel $ Cost / hour Normal time(NT) Crash cost/hr Crash time(CT) Normal cost(NC) Crashed cost (CC) Net saving= NC-CC 1A 1 1500 4 1500 3 $ 6,000 $ 6,000 $0 2B 3 500 4 500 4 $ 1,350 $ 1,350 $ 0 3C 1 1500 4 1500 4 $ 6,000 $ 6000 $ 0 4D 3 500 4 500 4 $ 1,350 $ 1,350 $ 0 5E 3 500 8 500 8 $ 12,000 $ 12,000 $ 0 6F 3 500 3 500 3 $ 4,500 $ 4,500 $ 0 7G 3 500 5 600 5 $ 7,500 $ 7,500 $0 8H 2 1,000 1 1,000 1 $ 2,000 $ 2,000 $0 9I 2 1,000 3 1,500 2 $ 6,000 $ 9,000 $ 3,000 10J 1 1,000 6 1,500 4 $ 6,000 $ 6,000 $ 0 12K 3 1,000 5 1,500 4 $ 15,000 $ 18,000 $ 3,000 13L 2 1,000 5 1,000 5 $ 10,000 $ 10,000 $0 14M 1 1,000 5 1,500 3 $ 5,000 $ 4,500 -$ 500 15N 3 1,000 3 1,000 3 $ 9,000 $ 9,000 $0 16 2 1,000 8 1,500 6 $ 16,000 $ 18,000 $ 2,000 Total $ 107,700 $ 115,200 $ 7,500 Activity No. Of Assistant Engineers $ Cost / hour Normal time Crash cost/hr Crash time Normal cost Crashed cost Extra cost 9 2 600 6 800 4 $ 7,200 $ 6,400 -$ 800 14 3 600 5 800 3 $ 9,000 $ 7,200 -$ 1,800 15 3 600 3 600 3 $ 4,800 $ 4,800 $ 0 Total $ 21,000 $ 18,400 -$ 2,600 Crashed cost (CC) = Personnel x Crash cost/hr x Crash time (CT) Crashed cost (CC) for activity 12 = 3 x 1500 x 4 = 18000 Crashed cost (CC) for 16 activity = 2 x 1500 x 6 = 18000 Total cost of crashing = 18,400+115,200= 133,600 Total normal cost = 21000+107,700= 128,700 Extra cost due to project crashing = Total Crashed cost (CC) - total Normal cost (NC) Extra cost due to project crashing = 133,600– 128,700= 4,900 Activities to be crashed are those activities with professional engineers that is main reason of excluding activity A-G Shorten the length of a project merely reflects an attempt to reduce the indirect costs associated with running the project, such as facilities and equipment costs, supervision, and labor and personnel costs. The cost of crashing the project is $4,900. However, crashing analysis requires estimates of regular and crash times and costs for each activity, path lengths, and identification of critical activities. The cost of $4,900 is also as result of the use of additional funds to support additional efficient equipment, and the relaxing of some work specifications. The shortened activities are mostly on critical path because shortening noncritical activities would not have an impact on total project duration. From an economic stand point, activities should be crashed according to crashing costs: crash those with the lowest crash cost first. The Inflation Rate All data recorded at current value refers to the value in monetary terms, whereas the recording of data in real term reflects the value in terms of goods or services. In other words, the real value always takes into account the impact of inflation. On the contrary, nominal or current value does not take into account the impact of inflation. These two values are used because there is a need to know the difference in the money value of an item at some other point in time. It is therefore, real price is calculated from current price. The real price may be calculated by identifying a current price, income level or output and then multiplying it by the result of the ratio: year desired/original year. The amount calculated in this way is regarded as the real amount. The current inflation rate in the market is 2.2% and it’s the rate that is used in all cash flow analysis. Inflation rate sets the actual number of dollars you will be paid with no offset for future inflation. Read More