Real estate and construction
Critical path
The longest chain of dependent tasks in a project, which sets how fast it can finish.
Last reviewedWhat does Critical path mean?
The critical path is the longest sequence of tasks that depend on each other in a project. It sets the shortest possible time to finish: a delay to any task on it delays the whole project, while tasks off it have spare time, called float. The critical path method was developed in the late 1950s by James Kelley and Morgan Walker at Remington Rand and DuPont. Example: path A is foundations (3 months), then structure (6), then fit-out (4), 13 months in total; path B is ordering equipment (8), then installing it (3), 11 months. Path A is critical, so the project takes 13 months and path B has 2 months of float. To finish sooner, speed up tasks on path A.
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Related terms
- BottleneckThe slowest step, which limits the output of the whole process.
- EPC contract (engineering, procurement and construction)A contract where one contractor designs, buys and builds a project and hands it over ready to run.
- Little's lawItems in a system = arrival rate × time each item spends in it.
- NOI (net operating income)A property's income after operating costs, before debt payments, depreciation and income tax.
- Cap rate (capitalization rate)A property's net operating income divided by its value: its yield at today's price.
- REIT (real estate investment trust)A company that owns income-producing property and pays out most of its income to investors.
- Loan-to-value (LTV)A loan as a share of the value of the property securing it.