W4_Afra_Cost and Time Trade-Off Part 1

By -


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 (3rd or 4th) 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).
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/

Comments

  1. Dr. PDGNovember 30, 2017 at 9:10 AM

    AWESOME, Afra!!! Now that you have the CONTRACTORS curve you need to look at YOUR curve..... Going to be very interesting to see what OPWP's curve will look like as you are actually selling the electricity/water that the operating facility produces..

    Looking forward to seeing that curve...

    BR,
    Dr. PDG, Jakarta

    ReplyDelete

Post a Comment

Popular posts from this blog

W1_Thuraiya_Leadership Styles analysis Using Tuckman model

By -
Image
1-       Problem Recognition:          OPWP PMP team are currently at the stage of distance learning in the PMP course. The     team consist of 13 members and has started course from 29 th Oct and we’re aiming to be certified no later than 25 th Mar . During the current stage, every individual must submit a weekly blog related to a real work issue faced in the organization to determine the causes and the solutions. In  first blog Dr. Paul has requested  to measure the team development and behavior using   Tuckman’s Model. To insure the success of every project the  members must  understand the goals and the roles of each one to collaborate to achieve their goals. Further the team leader must understand his team behavior to know the most optimum leadership style must be adopted while managing the project.  2-      Identify the Feasible Alternative Tuckman m...
Read more
By -
Image
W1__Hamda__Tuckman Analysis Assignment__ 1-        Problem Definition After completion the first stage in PMP course which was conducted in Muscat from 29 th of October 2017 to 2 nd of November 2017 which was Face to Face stage, and following the formation of the OPWP-PMP team during this stage, the team is starting the second stage in this program which is the Distance Learning. Weekly Blog is one of the tasks in this stage. The first topic of the first weekly blog is suggested by Dr.Paul which is using Tuckman’s Model to know in which phase of this model the team is operated in and which style of leadership should be adopted in order to develop the team to achieve its goals. 2-        Identify the Feasible Alternative The Forming, Storming, Norming, and Performing model of group development was first proposed by Bruce Tuckman in 1965 who maintained that these phases are all necessary in order to develop...
Read more

W1_MA_Tuckman Analysis Assignment

By -
Image
Problem Definition Bruce Tuckman model used to identify the team status and the development phase of the project team. As the team go through these phases, different strategies should be implemented by the team leader and managers. This assessment will provide enough information for the team leader and even for the team members that would give a good understand the team performance.   Identify the Feasible Alternative There were 4 stages model of "forming, storming, norming, and performing" introduced by Bruce Tuckman in 1965. However, a fifth stage was added “adjourning” which describe the phase that the team go through after the achievement of project tasks and completion of the project. Figure 1 , development stages [2] In each phase, the leadership style should be in alignment with that specific phase which enhance the development of the team and improve the performance of the team as well. There are different styles that could be used by the team le...
Read more