Project Management Training — FAQ part 4: Cost-Time Graph and Shortening Critical Path

How can a cost-time graph be used by the project manager?

A cost-time graph allows a project manager to mathematically determine which activity (or activities) in a project can have their duration time altered and how that alteration will affect total costs. Often, the paramount concern is to decide which activities can be shortened with the smallest increase in cost/unit-time. Reducing the duration of an activity is called crashing. The smallest unit of time an activity can be crashed is called its crash time. And, the cost of crashing an activity is called crash cost. These parameters are gathered and determined by experienced personnel. A cost-time graph brings forward the importance of indirect costs, which are often neglected when there is pressure to get things done. Making cost-time graphs, in the pre-project (planning stage), is the primary choice since normal times are more meaningful.

Is it possible to shorten the critical path and save money?

Yes! One reason that this is possible is due to the inverse relationship of direct cost and indirect costs. That is, an increase in project duration usually means a lowering of direct costs and an increase in indirect costs. An analysis can determine the optimum (lowest) total cost as the project duration time is reduced. Individual activities are shortened in order to achieve the lower total duration (which sometimes results in the creation of additional critical paths). However, the total cost vs. project duration can be considered parabolic – this is, because the direct costs are curvilinear while indirect costs are fairly linear. In other words, you can only shorten activities and reduce a certain extent before the time/cost reduction effect reverses itself.