Applications of Cobb-Douglas Production Function in Construction Time-Cost Analysis

Cobb-Douglas Production Function was widely used in economics and productivity studies across many sectors. The function's quantitative modeling of resource inputs and production outputs is appealing to the research domain of construction management. In this thesis we explored this function's application in construction schedule crashing and project risk analysis related to duration of construction projects. Existing research on construction time-cost tradeoff issues rarely explore the origin of the crashing cost which is defined as the cost needed to shorten the project to the desired duration. In the existing literature crashing cost function was either assumed without much justification, or came from ad-hoc regression analysis of historical data of some actual projects. Cobb-Douglas production function, which defines the portion of labor and equipment needed based on the production rate, provides a much-needed piece to modeling the cost functions in the construction time-cost tradeoff problem during the schedule crashing process. This new perspective fills a gap of existing time-cost tradeoff research by considering project duration, labor and equipment cost as parameters of the Cobb-Douglas production function. A case study was presented to show how the proposed framework works. Case results are presented based on deterministic values of Cobb-Douglas function's parameters (and). Presented results show each of labor and equipment's portion in total cost. Here, more than that we had earlier, we can analyze different options based on just one of these factors to find the optimum solution. Not only, the total labor and total equipment cost of a project is available, labor and equipment cost of each activity's option can be calculated and compared with other options. After that, sensitivity analysis on the mentioned parameters was conducted to further explore the model's sensitivities to these parameters. Inflation factors in labor and equipment cost were incorporated in the sensitivity analysis based on assumed costs' fluctuation range. The results show that the total cost highly depends on the summation of and. The conclusion of the thesis is that utilizing Cobb-Douglas production function in construction crashing cost analysis expands our understanding of crashing cost sources and the portion of each of elements. Moreover, from sensitivity analysis results, it is concluded that labor and equipment efficiencies have significant effects on total cost of a project. Cost inflation analysis makes managers aware of uncertain market which influences total cost and duration of a project.