Multi-mode capital-constrained project payment scheduling model considering bonus-penalty structure

Abstract

ABSTRACTIn this paper, a multi-mode capital-constrained project payment scheduling problem with bonus-penalty structure is developed where activities can be performed under one of several possible modes and a bonus-penalty structure exists at project deadline. The objective is to assign activity modes and progress payments so as to maximize the net present value (NPV) of the contractor under the constraint of capital availability. The event-based method is employed to construct the mathematical model and Tabu search (TS) is used to solve the strongly NP-hard problem. Using a randomly generated dataset, we compare the performance of our solution with benchmarks generated by Simulated annealing (SA), Random sampling (RS), and Multi-start iterative improvement (MSII) methods, and demonstrate that the proposed TS is superior. Moreover, the effects of several key parameters on the contractor’s NPV are investigated. We show that the contractor’s NPV grows with the increase in the contractor’s initial capital availability, the payment number, and the rewarding rate in bonus-penalty structure.