Closure to “Time-Profit Trade-Off Analysis for Construction Projects” by Ahmed Senouci and Khaled El-Rayes

Abstract

This paper presented an interesting variation from traditional time-cost trade-off analysis by considering a time-profit trade-off analysis. The paper incorporated a mathematical formulation of a schedule optimization model that considers activities’ crew formations, direct costs, indirect costs, markup, and interest charges. While the general formulation is rational, the discusser argues that traditional time-cost trade-off, rather than the proposed time-profit trade-off, analysis is more practical and useful to contractors, and the model can be easily adjusted to account for it. The two stated objectives of the paper’s time-profit optimization model are to 1 minimize the overall project time and 2 maximize the project profit. While indeed maximizing profit is an essential objective for contractors, minimizing time is a costly endeavor. Practically, contractors need either to meet any stipulated deadline or, if no deadline is specified, to develop a schedule that is least costly so that the bid price is as low as possible. In the paper’s model, Profit= Total Cost $ Markup % −Interest Charges $ Thus, under a given project duration, different activity options can produce several schedules with the same duration, with little variation in their interest charges. As such, with interest charges being constant, profit becomes a direct function of cost namely, direct cost since indirect cost is constant for that duration . Therefore, the higher the direct cost, the higher the profit as a dollar value . To maximize profit objective 2 of the model , therefore, cost needs to be increased by selecting the most expensive crew formations for the activities. The serious implication is that bid price becomes very high. Also, practically, it is unjustifiable to needlessly use expensive methods just to increase the profit. In contrast, selecting the least-costly activity