Finding the cheapest duration for a job: pricing time before you are late

A job falls behind. The team adds a second crew, books some weekend work and orders materials earlier than planned. The job finishes on time, and when the final costs are added up, it has cost less than the original plan. Everyone counts it as a successful recovery.

It is something else as well: proof that the original plan was never the cheapest way to do the work, and that nobody had checked. The business did not save money by recovering. It stopped spending money it had been committed to spending since the plan was approved. The same analysis could have been done at the start, in an afternoon, when the cheapest options were still available.

This article explains why a job has a duration at which it costs least, why that point depends on which time-related costs you count, why the cheapest ways to save time expire early, and how to price duration before a job starts rather than during a recovery. It is general information for businesses that plan and price project work, and for customers deciding whether to pay for faster completion.

Two kinds of cost pull in opposite directions

A job’s total cost has two parts that behave differently as its duration changes:

• Direct costs, such as labour, materials and subcontractors for the work itself, tend to rise when you compress a job. Overtime, extra crews, premium freight and weekend rates all cost more.
• Time-related costs, such as site supervision, hired equipment, site amenities, temporary facilities, storage and finance on money already spent, fall when the job is shorter, because they accrue every day the job runs.

Shortening the job buys days on the activities that control the finish date, starting with the cheapest. Each additional day saved usually costs more than the last, as the cheap options are used up. Meanwhile each day saved avoids one day of time-related cost. The cheapest duration is where the cost of saving one more day rises above the time-related cost that day would avoid.

That point is a property of the job and its costs, and it can be found before work starts.

Count only time costs that genuinely stop

The answer depends heavily on what you count as a time-related cost, and this is where many calculations go wrong. Businesses often charge each job a daily share of general overhead, such as office rent, administration and management salaries. That allocation has a legitimate accounting purpose. But if the job finishes a week early, those costs do not stop. They are simply recovered from other work.

So separate two things:

• Avoidable time costs: costs that genuinely stop when the job ends. Site supervision dedicated to this job, hired plant, site amenities, temporary storage, parallel running of old and new systems, finance on drawn money.
• Allocated overhead: a share of costs that continue regardless.

Including allocated overhead makes faster completion look more valuable than it is, unless the people and resources released can genuinely be put to other paid work. If they can, the saving is real. If they would simply wait for the next job, it is an accounting transfer, not a cash saving. When in doubt, run the calculation both ways and see whether the answer changes.

Why the cheapest options expire early

The cheapest ways to save time are usually available only at the start:

• Ordering long-lead items earlier, before expediting is needed.
• Booking a second crew or a subcontractor’s slot while they are still available at normal rates.
• Sequencing work differently, for example running two independent activities in parallel from the beginning.
• Prefabricating parts off site while other work proceeds.

By the time a job is visibly late, these options are gone or have become expensive. The business is buying time from a shorter menu at higher prices. That is why late compression often looks costly and reinforces the belief that speed always costs more. The what your schedule quietly decides article covers how sequencing choices made at the start shape what can be done later.

Price duration at planning

A simple process, done when the plan is prepared:

1. Identify the activities that control the finish date. Only shortening these brings the finish forward. Shortening other work just adds spare time.
2. List the ways to shorten each, with the cost of each and the days saved.
3. Rank them by cost per day saved, cheapest first.
4. Work out the avoidable time cost per day for the job, and separately the allocated overhead.
5. Take each option whose cost per day saved is below the avoidable daily cost. Stop when the next option costs more than it saves.
6. Check that the controlling activities have not changed. Shortening one chain can make another chain the longest.
7. Record the chosen duration and the reasoning, so the decision can be revisited if circumstances change.

The testing the dependencies in your schedule article covers checking which links genuinely control the finish date.

Sometimes slower is cheaper

The analysis works in both directions. A plan prepared under pressure may already include overtime, weekend work or extra crews that cost more per day than the time costs they avoid. In that case, the cheapest duration is longer than the plan, and removing the most expensive acceleration saves money. If the customer’s date allows it, a slightly longer job with normal hours can be both cheaper and lower in risk. The point is not to go faster or slower by habit, but to know where the minimum sits.

Keep the daily rate honest

Because the answer depends so heavily on the daily time cost, check where that figure came from. Who set it, when was it last updated, and what does it include? A rate inherited from an old job, or one that blends site costs with office overhead, can quietly push every plan towards the wrong duration. Break it into its parts, mark which parts stop when the job stops, and update it when site costs, hire rates or finance costs change. A change in how overhead is allocated changes the apparent cheapest duration of every job, even though nothing about the work has changed.

Compression adds risk

Shortening a job usually concentrates more people and activities into less time. More trades on site at once means more coordination, more chance of getting in each other’s way and, with long hours, more fatigue and quality problems. The calculation above prices one expected outcome, not the spread of outcomes around it. Avoid compressing every controlling activity until there is no spare time left anywhere, keep a little float on the path to the finish, and never compress work in ways that create safety hazards.

The customer’s side of the calculation

The analysis so far looks at the contractor’s costs. A customer often has a much larger stake in an earlier finish: a shop opening sooner, a machine producing sooner, rent on two premises ending sooner. Where the customer’s value of a day is high, it can be worth the customer paying for compression that the contractor would not choose on its own costs, through an early completion bonus or a priced acceleration option. The what is a day of delay worth article covers calculating that daily value.

A worked example

This is an illustration. A commercial fit-out contractor is planning a café fit-out with a baseline duration of 50 working days. Its avoidable time costs while the job runs are about $900 a day: a dedicated site supervisor at about $600, hired access equipment and site amenities at about $250, and temporary storage at about $50. The business also allocates about $400 a day of office overhead to each job.

The estimator lists four ways to shorten the activities that control the finish date:

Using the avoidable daily cost of $900:

• Early joinery order: saves 5 × $900 = $4,500 at no extra cost. Take it.
• Second electrician: saves 4 × $900 = $3,600 for $2,000, a net saving of $1,600. Take it.
• Weekend painting: saves $2,700 for $2,700. It breaks even; worth taking only if the customer values the earlier finish.
• Second plastering crew: saves $2,700 for $3,900, a net cost of $1,200. Do not take it.

Before settling on the result, the estimator checks the other chains of work. With joinery and electrical shortened, the cool room delivery and installation now sits only two days from controlling the finish, so the estimator confirms the supplier’s delivery date in writing and keeps those two days as a buffer.

The cheapest duration is therefore 41 working days instead of 50, saving about $6,100 compared with the baseline plan. If the estimator had used the full $1,300 a day, including allocated overhead, weekend painting would have looked like a $1,200 saving and the extra plastering crew like a break-even, even though the office costs would not actually fall.

The café owner, who expects to earn a contribution of about $1,500 a day once open, is offered weekend painting as an option for $2,700, bringing completion to 38 days. Three extra trading days are worth about $4,500 to the café, so the owner accepts.

One more point: the early joinery order is free only because it was made at planning. If the job had fallen behind and joinery had to be expedited later, the supplier would have charged a premium, and the cheapest option on the list would have disappeared.

How this applies to a small Australian business

• Work out the cheapest duration at planning, not during recovery.
• Separate avoidable time costs from allocated overhead.
• Only shorten activities that control the finish date.
• Rank compression options by cost per day saved.
• Use early, cheap options such as ordering and booking ahead.
• Recheck which activities control the date after each change.
• Offer customers priced acceleration where early completion is valuable to them.
• Record the reasoning for the chosen duration.

Signals worth watching

• Recoveries that finish cheaper than the original plan.
• Daily job costs that include office overhead with no distinction.
• Long-lead items ordered at the usual time on tight jobs.
• Compression applied to work that does not control the finish date.
• Customers who would pay for speed but are never asked.
• Re-baselined plans that erase the evidence of what was learned.

Common mistakes

• Accepting the first schedule as the cheapest one.
• Counting allocated overhead as if it were saved.
• Waiting until the job is late to look at compression.
• Shortening activities with spare time.
• Ignoring the customer’s value of an earlier finish.
• Forgetting that options expire.

Frequently asked questions

Is this worth doing on small jobs? For short, simple jobs, probably not in detail. For jobs with significant daily site costs or valuable early completion, an afternoon’s analysis often pays for itself.

What if released staff can be put on other paid work? Then part of the allocated overhead becomes a genuine saving. Include it to the extent that the redeployment is real.

Does faster always mean more risk? Often it does. Compression can increase coordination problems and fatigue. Allow for that in the cost of each option, and avoid compressing safety-critical work in ways that create hazards.

Should we share this analysis with customers? Sharing the options and prices, without your internal costs, can open a useful conversation about early completion.

How should we price acceleration for a customer? Offer specific options with the days saved and a price for each, including a margin for the extra coordination and risk. Customers can then choose how much speed is worth to them.

What if several jobs share the same crews? Shortening one job can free people for the next, which makes the saving real. But if compression pulls people from another job, the cost of delaying that job belongs in the calculation too.

What if the customer’s contract sets the date? The analysis still shows whether finishing earlier would reduce your costs, and whether a priced acceleration offer makes sense.

Questions to ask

• Which activities control the finish date of this job?
• What are our genuinely avoidable costs per day?
• What are the cheapest ways to save time, and do they expire?
• Where does the cost of saving another day exceed what it saves?
• What is an earlier finish worth to the customer?
• Did our last recovery reveal a cheaper plan we should have chosen at the start?

Bringing it together

Every job has a duration at which it costs least, set by the balance between rising direct costs and falling time-related costs. Find it at planning, when the cheapest options such as early ordering and booking are still available. Count only time costs that genuinely stop when the job ends, compress only the activities that control the finish date, and stop when the next day saved costs more than it avoids. Then ask what an earlier finish is worth to the customer, because the best duration for both parties may be shorter still.

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Source: KEVOS notes, drawing on teaching material on time-cost trade-offs, schedule compression and indirect cost allocation. Examples and figures in this article are illustrations. This article is general information.