A two-stage stochastic programming model for resource allocation in project management

In a large-scale construction project, the project manager needs to allocate many resources, including numerous workers, various kinds of materials, and a lot of cash. Therefore how to allocate resources and to control cash flow ahead of time is particularly important. The general contract and material price fluctuation make the project manager to take great risk. In this paper, we establish a two-stage stochastic programming model which takes price fluctuation, working capital and other necessary constraints into account. We employ a sample-based heuristic to study how price fluctuation affects the progress schedule of the project. We also conduct sensitivity analysis on the important parameters, including working capital and labor cost.