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Utilizing CPM Schedules to Track Resources Can Cuts Costs

April 4, 2016Brook Bolger

Aegis Project Controls’ primary purpose is to support project management teams in their efforts to minimize the duration, risk and cost associated with their projects. While critical Path Method schedules are widely recognized for their ability to manage time on a project, they are often under-utilized as a cost-reduction tool. CPM Scheduling can effectively control costs not only by reducing time, but also by making the most efficient use of materials, allowing for asset re-use, a more efficient allocation of labor, as well as minimizing stand-down and re-mobilization costs.

The model of many vertical construction contractors is to subcontract out nearly every facet of work and to manage the subcontractors carefully thereafter. Most of the variable costs of this model, which derive from overhead and equipment, can be reduced by minimizing the duration in which those assets are allocated to the project. Assuming time can be saved on the project via creative solutions without paying for acceleration, minimizing duration generally helps to cut costs. This “time saved equals money saved” approach to scheduling is often where cost-management derived from the schedule ends. However, contractors who personally perform some scopes of work have the opportunity to take more schedule variables into account when searching for cost savings.

One method for managing costs in self-performed work is utilizing manpower efficiently. In most cases using the fewest amount of optimally-sized crews leads to the highest output of work per man-hour. Keeping this in mind while using the schedule to plan out crew flows can lead to significant cost savings. Implementing a crew flow plan into the Project’s CPM schedule that minimizes the number of crews and the size of those crews is yet another way to significantly reduce costs.

As a final example, mobilization and stand-down costs charged by subcontractors are sunk costs that add no value to the end product. Using the CPM schedule to plan work which minimizes stand-down time and re-mobilization avoids these liabilities. Planning work activities that are subject to these costs in order to minimize equipment usage and gaps in work time is a natural function of the Project Schedule.

All facets of work in the project schedule can be controlled via preferential logic ties including: material flow, crew efficiency, stand-down costs, and mobilization costs. Controlling for these factors enables project managers to consider a wider range of variables when making critical project decisions. Utilizing CPM to manage both duration and costs empowers managers to make more informed decisions that ultimately help them to significantly reduce costs.