A client and constractor enter into an agreement for a project either by competitive bidding or negotiation. Regardless of the type of project, progress payment to the contractor are an important issue in project management because of their potential impact on project finance and activity schedules. In this paper, we consider the problem of simultaneously determining the amount and timing of progress payments in projects from a client's perspective. We develop several mixed integer linear programming models based on some practical methods of determing payment schedules, and discuss properties of the models as well as characteristics of optimal payment schedules obtained with each of the models.
Payment schedules offered by the client determine the contractor's schedule of activities.
Thus, we also examine the impact of the client's payment schedules on the contractor's activity schedule. Our analysis shows that the client obtains the greatest benefit by scheduling the project for early completing. Making payments at regular time intervals typically increases the client's expenses. Regardless of the criteria by which payment schedules are determined, schedule disagreements arise between the two parties.