Ask the person running a major project what it would cost to recover a week, and you will usually get a precise answer: a second crew, overtime, air freight, a premium for expedited approval. Ask what that week is worth, and the room often goes quiet. One side of the trade is priced to the dollar. The other is left blank.
That is not really a trade-off. It is a purchase decision made by looking only at the price. It tends to produce the same answer every time: acceleration looks expensive and is declined, while delay looks free and is absorbed. For anything that earns money once it is finished, such as a new outlet, production line, rental property, product launch or customer installation, that answer is often wrong.
This article explains how to calculate what a day of delay actually costs, why the figure is not the same every day, how to use it to decide when speed is worth paying for, and how to avoid the opposite error of inflating the number to justify anything.
Why delay looks free
A project and the asset it produces usually have separate ledgers. The project’s ledger opens at approval and closes at handover, and measures spending against budget. The asset’s ledger opens at handover and runs for years, and measures earnings. A day of delay sits on the boundary between them, so it is charged to neither. The project team is measured on cost and schedule variance, not on the earnings the asset was approved to produce.
The familiar project triangle of time, cost and quality teaches that these trade off against each other, but supplies no exchange rate. Without one, the trade is settled by whichever side has a number, and cost always does.
Common misreadings
- Time and cost can be traded by judgement. Without a daily figure, judgement defaults to the visible cost.
- A day is worth the revenue it would earn. Using revenue rather than contribution produces an inflated figure that justifies almost any spending and gets the idea dismissed as advocacy. The right input is contribution margin: revenue minus the variable costs of earning it.
- A lost day can be made up later. It usually cannot. Delay either shifts the whole earnings stream later or removes days from the end of a fixed period, and both are worth more than the slow early days people imagine catching up.
- The contract already prices delay. Delay damages in contracts, often called liquidated damages, are negotiated amounts, frequently capped. They reflect what a supplier would accept, not what a day is worth to the business.
Calculating the daily figure
The earnings side
Start with the contribution the asset will earn per day once it is running normally. Take it from the business case that justified the investment, not from the project budget.
Then think about which day is actually lost. If the asset has a fixed life, such as a lease, licence or contract term, delay removes days from the end of that period, when the asset is fully established. The daily figure is then the mature daily contribution. If the life is open-ended, delay shifts the whole stream later, and the cost is roughly the mature daily contribution adjusted for the time value of money. Either way, the figure is usually higher than the slow first days teams tend to picture.
The cost side that keeps running
Add the costs that continue while the asset is not earning: staff already hired and being trained, rent, finance charges on money already spent, insurance, security, subscriptions and contracted supplies that start on a set date regardless. Most of these figures already sit in approved budgets.
Together, the two sides give a daily rate.
Days are not all the same size
Date-triggered events turn a smooth daily rate into a calendar with cliffs:
- Seasonal peaks: missing the start of a busy season can cost several times as much as the same delay in a quiet period.
- Customer windows: a retailer’s range review, a promotion or a launch event.
- Lease and contract start dates: rent or obligations begin regardless of readiness.
- Finance terms: facilities expiring or interest rates changing on set dates.
- Approval validity: permits or certifications that lapse.
A delay that pushes an opening from the start of a peak season to the end of it may cost more than a much longer delay in a quiet month. That means acceleration money should be concentrated on protecting the expensive days, which requires knowing which days they are before the schedule is fixed. Present the daily figure as a calendar, by month, with the cliffs marked, rather than as a single number.
Only some days move the finish date
A day of delay costs the full daily figure only if it delays the date the asset starts earning. Many tasks in a project have float, meaning they can slip without affecting the finish. Paying to speed up a task with plenty of float buys nothing. Before spending on acceleration, check that the task is on the critical path, the chain of tasks that sets the finish date, and that speeding it up will not simply make another chain critical. The article on testing the dependencies in your schedule explains how to examine the logic behind the critical path.
Who should own the figure
The daily figure should be owned by the person accountable for the asset’s earnings, not by the project team. That person knows the business case, the seasonal pattern and the commercial commitments, and has the authority to trade money for time. Publish the figure before the schedule is fixed, with its assumptions and the date it was prepared, and update it when the business case changes. A figure prepared after a delay has occurred, to justify a decision already made, carries less weight than one agreed in advance.
Three rules for using the figure
- Show both sides together. No proposal to speed up, and no decision to accept a delay, should be approved without the daily value for the affected period shown beside the cost.
- Buy days only when they are worth it. Pay for acceleration only when its full cost is below the value of the days protected, with a margin for the real possibility that acceleration is paid for and does not work.
- Treat cliffs as owner decisions. Any delay that crosses a marked cliff should be decided by the person accountable for the asset’s earnings, whatever its length.
Spend where the days are most expensive
Businesses often over-accelerate a visible job of modest daily value while absorbing months of delay on an asset worth much more per day, simply because its sponsor is quieter. When several projects compete for acceleration money or scarce people, rank them by the value of a day and direct resources accordingly. This is not an argument for spending more overall. It is an argument for spending where it pays.
Early finish has a value too
The same calculation works in reverse. If finishing early lets the asset start earning sooner, each day gained is worth roughly the daily figure for that period. That can justify paying for options that create the possibility of an early finish, such as ordering long-lead items earlier or pre-assembling equipment off site, even if the planned date does not change. It can also justify sharing some of the gain with contractors through early-completion incentives. Just make sure the business is actually ready to earn earlier: staff trained, stock in place and customers informed.
Compare contract terms with your own figure
When negotiating contracts for work that delivers an earning asset, compare any proposed delay damages with your own daily figure. If the damages are a small fraction of the real cost, the business carries most of the risk of delay. That may be acceptable, but it should be a known decision. Consider early-completion incentives where speed is valuable, and take advice on contract terms.
A worked example
This is an illustration. A small brewery is fitting out a cellar door and taproom, planned to open on 1 December, ahead of the summer peak. The business case estimates daily contribution of about $2,800 during the December to February peak and about $900 in the quieter shoulder months. While the venue is not open, costs continue at about $1,500 a day: staff already hired and in training, rent and finance charges.
During the fit-out, the joinery contractor reports a three-week delay, which would push opening to 22 December. Two acceleration options are available:
- A second joinery crew and overtime, costing about $18,000, recovering about two weeks.
- Air-freighting imported taps instead of waiting for sea freight, costing about $3,500 and recovering about four days on a separate part of the critical path.
In December, a day of delay costs about $4,300: $2,800 of lost contribution plus $1,500 of continuing costs. Two weeks is worth about $60,200, far more than the $18,000 for the second crew. Four days is worth about $17,200, far more than $3,500 for air freight. Both are clear purchases.
If the same delay had fallen in a shoulder month, a day would be worth about $2,400 and two weeks about $33,600. The second crew would still be worth buying, but with a smaller margin. Allowing a 30% chance that the extra crew fails to recover the time, the expected value of the two weeks is about $23,520, still above $18,000, but closer.
The joinery contract includes delay damages of $500 a day, a fraction of the real daily cost. The owner notes this for future contracts, and next time negotiates a bonus for early completion alongside the delay damages.
How this applies to a small Australian business
Small businesses often feel delay costs acutely but rarely calculate them. Practical steps:
- Calculate a daily figure for any project that delivers an earning asset: contribution plus continuing costs.
- Use contribution, not revenue.
- Mark the cliffs: seasons, customer windows, lease starts, finance dates and approval expiries.
- Show the daily figure beside every acceleration decision.
- Concentrate acceleration on the most expensive days.
- Compare contract delay damages with your own figure, and take advice on contract terms.
- Measure success by the date of first revenue, not only by cost against budget.
The articles on time to value and what waiting for decisions costs cover related ideas.
Signals worth watching
- Acceleration proposals argued on cost alone.
- Delay decisions made by people not accountable for the asset’s earnings.
- Opening or launch dates slipping quietly in forecasts while the project reports “contained” variances.
- The same delay damages used in contracts for very different assets.
- Acceleration spending spread evenly instead of concentrated on expensive periods.
- First-year earnings forecasts revised down in the same month a schedule slips, with nothing connecting the two.
Common mistakes
- Leaving the value of time blank in acceleration decisions.
- Using revenue instead of contribution.
- Treating every day as equal.
- Assuming lost days can be recovered later.
- Relying on contract damages as a measure of loss.
- Spending acceleration money where it is most visible rather than most valuable.
Frequently asked questions
Is this only for big projects? No. Any project that delivers something that earns money, such as a new outlet, a new machine or a product launch, has a daily cost of delay. The calculation takes minutes once the business case figures are known.
What if we do not know the contribution yet? Use the estimate from the business case and a range. Even a rough figure is better than treating delay as free.
Should we always buy speed when it is worth more than it costs? Usually, but also consider risk: whether acceleration might create quality or safety problems, and whether it is likely to work. Include a margin for those risks.
How do we handle uncertainty in the daily figure? Use a range, such as a low and a high estimate, and check whether the decision changes across it. If acceleration is worthwhile even at the low end, buy it. If it depends on the high end, look harder at the assumptions before committing.
What about projects that do not earn revenue directly? Many still have a daily cost, such as continued rent on an old site, overtime to cover missing capacity or penalties for late compliance. Count those.
Questions to ask
- What is a day worth on each of our main projects, by month?
- What did we pay per day on our last acceleration decisions, and what were those days worth?
- Which cliffs fall in the next eighteen months, and who keeps that calendar?
- Who is accountable for first-year earnings on our largest project, and were they involved in setting the schedule?
- How do our contract delay damages compare with our own daily figure?
- When we last accepted a month of delay, what did we say it was worth?
Bringing it together
A business that cannot price a day is not really managing the trade-off between time and money. It accepts whichever side has a number, and that side is always cost. Calculate the daily figure from contribution and continuing costs, present it as a calendar with cliffs, show it beside every acceleration decision, buy days only when they are worth more than they cost and concentrate effort on the most expensive days. Approving a schedule without the value of a day beside it sets that value at zero.
Source: KEVOS notes. Examples and figures in this article are illustrations. This article is general information, not financial or legal advice.
