Assessment of activities criticality related to cash flow parameters

Cash flow modeling is a very useful financial management tool contractors use to run sustained and profitable business. The activities' start times are the inherent variables which determine the periodical negative cumulative balance values of the cash flow models. For a given schedule, as the start times of activities vary while the dependency is maintained, the maximum value of the negative cumulative balance varies accordingly. The Monte Carlo Simulation technique has been employed to generate schedules and the associated cash flow models for a 15-activity project by randomly specifying the activities' start times. Discrete uniform distributions are assumed for the start times with the minimum and maximum values representing the early start and late start times. In addition to the randomness of the activities' start times, the simulation model considered the stochastic nature of the periodic cash-in and cash-out through the adjustment of these transactions to account for the qualitative factors that impact their actual values which were identified and their probability distributions defined in previous studies. The @RISK commercial software was used to implement the simulation for the integrated Critical Path Method and cash flow models built in MS-Excel environment. Upon finishing the specified number of runs, @RISK displays the probability distributions for the cash flow parameters including the maximum negative cumulative balance, project duration, financing cost, and project profit. In addition, @RISK defines the criticality of the individual activities related to the cash flow parameters. The criticality of a given activity related to a cash flow parameter is an indication of the number of times the activity determined this particular parameter over the number of runs. At last, the criticality offers project managers a very useful criteria to identify the activities that should be completed on time to assure project completion within the time and cash constraints.