Project managers face difficult decisions with regard to completing projects on time and within the project budget. A successful project manager not only needs to assure that the project is completed, but also desires to make optimal use of resources and maximize the profitability of the project. The goal of this research is to address the time-cost tradeoff problem associated with selecting from among project activity alternatives under uncertainty. Specifically, activities that make up a project may have several alternatives each with an associated cost and stochastic duration. The final project cost is a result of the time and cost required to complete each activity and lateness penalties that may be assessed if the project is not completed by the specified completion time. In an effort to optimize the project time-cost tradeoff, a dynamic, simulation-based optimization method is presented. In particular, the method minimizes the expected project cost due to lateness penalties and the activity alternatives selected. The method is designed to be implemented in two phases. The first phase, referred to as the static phase, is implemented prior to the start of the project. The static phase results in the expected cost for the recommended project configuration including the alternative selected for each activity and the distributions of the project completion and total project cost. The second phase, referred to as the dynamic phase, is implemented as the project progresses. The dynamic phase allows the project manager to reevaluate the remaining project and activity alternatives to dynamically minimize the expected total project cost. The method provides an optimal solution under the assumptions of traditional crashing implementations and a heuristic solution for the generalized problem. An experimental performance evaluation shows the effectiveness of the method for making project management decisions. Finally, the method is fully implemented in computer software and integrated into a commercially available project management tool.

Library of Congress Subject Headings

Project management--Computer simulation; Business logistics

Publication Date


Document Type


Department, Program, or Center

Industrial and Systems Engineering (KGCOE)


Esterman, Marcos


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