W4_Afra_Cost and Time Trade-Off Part 1

1.      Problem Recognition 

There is a relationship between project’s completion time and its cost. By understanding the time-cost relationship, one is better able to predict the impact of a schedule change on project cost. 

The purpose of this blog is to validate the cost & time trade-offs by using Module 08-7 in The GUILD which provides a great illustration that is based on the US Department of Transportation. This validation will be used on my paper to demonstrate that what was done can work in electricity and water sector.

Figure 1 - Schedule vs Time Optimization

From the figure, the owner's optimum duration and owner’s optimum is almost always different from the contractor. The question here is how to define this difference? By finding the difference between owner’s optimum cost (8) and contractors optimum duration (4) which intersect with Total cost curve this is what determines the incentives (I) from the owner to the contractor to complete the project in the owner’s optimum time frame. 

Again, if we have a look at the difference between contractor optimum cost (10) between where contractors optimum cost (7) and the P75 duration intersect the contractor cost curve it provides us with disincentive (D).

The main purpose of this blog is to determine the best fit for contractor curve (the green line in above figure).

2.      Feasible alternatives

The learning curve is the suitable way to go with. Moreover, different organizations and different products have different learning curves. The rate of learning curve differs depending on the quality of management and the potential of the process and product. The lower the number (say 60% compared to 80%) the steeper the slope and the faster the drop-in costs. For this blog, three options were chosen (different rate) and these are:

·         85% Efficiency Factor (EF) / 35% Learning Curve Rate (LCR)

·         90% Efficiency Factor / 15% Learning Curve Rate

·         95% Efficiency Factor / 2% Learning Curve Rate

The Efficiency Factor or Company Efficiency Factor is the company’s degree of success in using the least possible inputs to produce highest possible output.

The formula for the learning curve is shown in figure 2 below:

Figure 2 – Learning curve formula

Below table shows some of the values for b according to each learning curve rate:

Learning Rate (%)	b
80%	0.322
85%	0.234
90%	0.152
95%	0.074

Table 1 – Learning curve values of b

3.      Development of the outcome of Alternative

The Learning curve will be determined according to above percentage for learning ratio by using excel sheet. The learning curve formula will be calculated for each month of the project (assume 25 months)   

The first Model developed was for the 85% EF / 35% LCR and the curve is shown below.

Figure 3 –  85% Efficiency Factor / 35% Learning Curve Rate

The second Model developed was for the 90% EF / 15% LCR and the curve is shown below.

Figure 4 –  90% Efficiency Factor / 15% Learning Curve Rate

The third Model developed was for the 95% EF / 2% LCR and the curve is shown below.

Figure 4 –  95% Efficiency Factor / 2% Learning Curve Rate

4.      Selection Criteria

The power project in OPWP designed to deliver around 1500 MW per day, using either gas turbine with a specific requirement or steam turbine and a lot of other equipment. The cost estimation here excludes any bad material used. Each project facility is based on an Engineering, Procurement and Construction (EPC) philosophy for design, procure and construct of each portion.

A cost of $1.5 Billion at month 12 will be used as criteria selection for all three models, and for the delay costs $0.30 Billion will be used for each month thereafter. As previously mentioned all three alternatives will use the same delay profile.

5.    Analysis and comparison of the Alternative

Using previous criteria each model was developed to have a cost of $1.5 Billion at the month 12 point, and thereafter the delay costs were added monthly.

Figure 5 –  85/35 Accelerated Costs & Delay Cost Chart

Figure 6 –  90/15 Accelerated Costs & Delay Cost Chart

Figure 7 –  95/2 Accelerated Costs & Delay Cost Chart

6.      Selection of the preferred Alternative

The following matrix shows the best alternative using the Multi-attribute decision making:

Note: 5 means excellent, 4 good, 3 average, 1 poor.

Attributes	85/35	90/15	95/2
Left side (Acceleration)	5	5	3
Right side (delay)	5	5	5
Data point suitable for acceleration	4	4	1
Data point suitable for delay	3	4	1
Total	17	18	11
Rank	2	1	3

Table 2 – Decision Matrix of Feasible Alternatives

According to the table, preferred alternative is to use the 90%EF/15% LCR curve

7.      Performance Monitoring and the Post Evaluation of result

      As this blog is part of a series number of blogs, until last blog (3^rd or 4^th) is complete, the post-evaluation performance cannot be performed until the full model is completed.

References: 

1.      Mallela, J., & Sadasivam, S. (2011). Figure 15 –Work zone road user costs: Concepts and applications : final report. U.S. Department of Transportation, Federal Highway Administration Office of Operations (HOP).

2. Bhatti, A. T. (2012, November 23).Learning curve phenonemon [Learning curve formula]. Retrieved from https://images.search.yahoo.com/search/images?p=learning+curve+formula&fr=yset_st_sf_ab&imgurl=http%3A%2F%2Fimage.slidesharecdn.com%2Flearningcurve-121123105005-phpapp02%2F95%2Flearning-curve-7-638.jpg%3Fcb%3D1360231937#id=2&iurl=http%3A%2F%2Fimage.slidesharecdn.com%2Flearningcurve-121123105005-phpapp02%2F95%2Flearning-curve-7-638.jpg%3Fcb%3D1360231937&action=click

3.      Time-Cost. (2017). Netmba.com. Retrieved 27 November 2017, from http://www.netmba.com/operations/project/time-cost/

4.      GUILD OF PROJECT CONTROLS COMPENDIUM and REFERENCE (CaR) | Project Controls - planning, scheduling, cost management and forensic analysis (Planning Planet). (2017). Planningplanet.com. Retrieved 27 November 2017, from http://www.planningplanet.com/guild/gpccar/validate-the-time-and-cost-trade-offs

5. W18_SJP_Cost & Time Trade-off Part 1 - Achieving Guild of Project Controls / AACE Certification BLOG. (2017). Achieving Guild of Project Controls / AACE Certification BLOG. Retrieved 27 November 2017, from https://js-pag-cert-2017.com/w18_sjp_cost-time-trade-off-part-1/