One of the most powerful things about ALICE is that we can explore multiple construction strategies and compare their effects on Project Duration and Cost. However, in order to effectively evaluate options, we need to have a solid understanding of how the cost is calculated and the underlying assumptions.
In this article you will learn about:
- Total cost
- Direct cost
- Indirect (Idle) cost
Total Cost in ALICE is the summation of two main components: Direct Cost & Idle Cost, therefore:
- Total Cost = Direct Cost + Idle Cost
Where Direct Cost is the cost spend on value-adding work (more details below) and Idle Cost is the cost spent waiting for work (more details below).
It can be read straight from the explore page (by clicking on a schedule dot), or from the top of the Analyze Page in the Analytics View for each schedule.
In the Analyze Page (Analytics View), Total Cost is also broken down by Labor, Equipment, and Material:
Direct Cost for Labor and Equipment
For Labor and Equipment, Direct Cost is calculated as:
- Direct Cost = Hourly Cost x Hours Used Productively
Where Hourly Cost is the Cost per hour of the resource and Hours Used Productively are the hours spent doing work rather than waiting (more on waiting below).
A breakdown of Direct Costs by type (Total, Labor, & Equipment) is provided at the bottom of the Analyze page.
You will notice in the example below that:
- Direct Labor Cost + Direct Equipment Cost do not add up to Total Direct Cost
- And there is no category for materials
That is because material costs can only be direct and the number can be viewed at the top of the analytics page.
Direct Cost For Material
For Consumable Material
Direct Cost is incurred at the start of every activity that “Requires” this material.
No Cost is incurred at the start or end of any activity that supplies this material.
For Reusable Material
Direct Cost is incurred equal to the cost of a single resource multiplied by the number actually used by tasks that “require” the resource only.
- if on days 1,2,3,4,5,6 the utilization is 0,3,2,0,2,4, then the costs incurred will be 0,3,0,0,0,1 (assuming the unit cost is 1) on the respective days.
- That is because on day 2 you will buy 3 units that you can reuse on days 3,4,5 but on day 6 you need 4 units and you had already bought 3, so you need to buy one more.
- No Cost is incurred by tasks that supply that resource.
Idle cost is the cost of having a resource (crew or equipment) on-site waiting for work.
It’s important to note that the resource is considered on site the moment it is first needed, and considered off site right after completing the last activity it is needed for.
The easiest way to visualize this is through the graphic below:
So the formula for idle cost becomes:
- Idle Cost = (Time on Site - Time Spent Working Productively) x Hourly Cost
Idle Cost for Crews vs Equipment
Since Crews only spend their working days on-site, but equipment stays there overnight, we need to make the differentiation when calculating Time on Site.
- For Crews, Time on Site only considers the working hours within a Crew’s calendar.
- For Equipment, Time on Site is 24 hours & 7 days a week cumulative.
Therefore it is very common to have a high idle cost for Equipment even when the schedule is efficient. This is because crews may only be working (and using the equipment) for 8 hours every 24.
The examples below will provide some more clarification:
Example 1: 1 Crew Utilized 100%
Example 2: The Case of Equipment
Example 3: Waiting Time Simplified
For more detailed cost info please refer to this article: Cost-over-time Curve.
Author: Mazen Faloughi