Deciding the way forward of construction contracts during cash flow deficits

Abstract

When a developer is building different construction projects simultaneously, cash flow management is very important. If the actual cash flow has been reduced than expected, the developer may need to decide which of the projects need to proceed and which need to be either suspended or terminated. This paper builds a financial model that evaluates the various construction projects based on the status of the project technically and financially to determine the decision path that needs to be undertaken for each project, based on a multivariate approach from the expected cash inflow, priority, likelihood, and time of construction. The model builds a chain of possible outcomes, where a project may be temporarily put on hold for a while and then resumed by cash inflow expected from previous projects. © 2010 IEEE.

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