The iron triangle as a way to explain the relationship between time, cost, and scope. If you change one of the three variables, the laws of project management . Project management is a tool that is used by many companies to help improve Thus, planners perform what is called time cost trade-off analysis to The project total time-cost relationship can be determined by adding up the direct cost. To understand this in further detail, read on to discover more about the relationship between time and cost in regards to project management.
Every day that a project is in existence, it costs money. The fixed costs of general facilities, services, accommodation, administration, and management are going to take place every day, irrespective of whether the work is done or not.
Cost, Time, Scope in Project Management
They only stop once the project is completed. Therefore, it is easy to see how you will go over estimates if you go over t he planned deadline.
What about direct costs? Direct costs, otherwise known as variable expenditure, include the likes of materials and labor.
These expenses are time-related in a number of different ways. The most obvious factor is cost inflation. So, if the project finishes later than expected, you could end up with greater costs on your hand because of an increase in wages or a rise in the price of materials.
Cost, Time, Scope
Another reason for an increase in expenditure is because of inefficient working. Waiting time or lost time can happen for a number of reasons, from poor planning to material shortages. The budgeted man-hours are likely to be exceeded if the project goes over the duration you have planned. Types of Costs The costs associated with a project can be classified as direct costs or indirect costs. Direct costs are those directly associated with project activities, such as salaries, travel, and direct project materials and equipment.
If the pace of activities is increased in order to decrease project completion time, the direct costs generally increase since more resources must be allocated to accelerate the pace.
Indirect costs are those overhead costs that are not directly associated with specific project activities such as office space, administrative staff, and taxes. Such costs tend to be relatively steady per unit of time over the life of the project. As such, the total indirect costs decrease as the project duration decreases.
The project cost is the sum of the direct and indirect costs. Compressing the Project Schedule Compressing or crashing the project schedule refers to the acceleration of the project activities in order to complete the project sooner.
The time required to complete a project is determined by the critical path, so to compress a project schedule one must focus on critical path activities. A procedure for determining the optimal project time is to determine the normal completion time for each critical path activity and a crash time.
The crash time is the shortest time in which an activity can be completed. The direct costs then are calculated for the normal and crash times of each activity. The slope of each cost versus time trade-off can be determined for each activity as follows: In this way, one can step through the critical path activities and create a graph of the total project cost versus the project time.
The indirect, direct, and total project costs then can be calculated for different project durations. The optimal point is the duration resulting in the minimum project cost, as show in the following graph: