Schedule Compression and Time-Cost Trade-Off - Construction Project Scheduling and Control - page 228

Effect of Acceleration on Indirect Costs
Indirect costs include mainly overhead items, such as the job trailer, equipment in
the trailer (copier, fax, etc.), utilities, staff members (salaried employees, not hourly
workers), and insurance. These expenses are directly and linearly proportional to the
duration, so when the project is being accelerated, they decrease at a constant rate, as
shown in Figure 8.7.
This constancy is true with minor acceleration techniques; however, it may not
stay constant with more aggressive acceleration techniques. With significantly more
workers and/or a second shift, the office may need more staff and equipment, its
utilities bills will increase, and there may be a need for night lighting. For simplicity,
the scheduler can either keep the assumption of constancy with minor negligible error
or assume that the overhead expenses will stay constant to a point and then increase to
a certain amount (per day) but remain constant from that point to end of the project.
This can divide the duration into two or more periods of constant overhead expenses
per day; for example, if the normal duration is 225 days:
• $200/day from 225-215 days
• $250/day from 214-200 days
• $300/day if duration is less than 200 days
Effect of Acceleration on Total Cost
Depending on the shape, slope, and real values, when we combine the curves for direct
and indirect costs, we obtain a curve like that shown in Figure 8.8.
We begin with the normal duration and the normal cost. Then we start acceler-
ating. At the beginning, the total cost starts decreasing at a decreasing rate (because
the increase in direct cost starts smaller than the savings in indirect cost per day).
However, as we accelerate more, the direct cost increase per day will reach a certain
point and then exceed the constant savings from indirect cost. At that point, when
the two amounts (increase of direct cost and decrease in indirect cost) are equal, we
have the least cost (LC) , with a corresponding least-cost duration (LCD) .Ifcost
is our priority, we must stop at this point. As we accelerate further, the total cost
Cost $
Accelerating
Duration (days)
Figure 8.7 Linear decrease in indirect costs with project acceleration