Effect of different procurement routes on contractors' cash flows

Abstract

This paper addresses the effect of different procurement methods (traditional, design and build and management contracting) on project cash flow. Historical data relating to the periodic cost of 150 construction projects were collected. Four criteria were identified to classify the projects: type of project, size, company and type of procurement. The effect of these criteria on the S‐curves was then examined using ANOVA. Results confirmed that differently procured projects with different sizes produce different patterns. The company and type of project did not significantly affect the shape of the S‐curve. Standard S‐curves were then modelled for the three aforementioned procurement routes. These curves were used to calculate the relevant cash flows using a computer based cash flow forecasting model. A series of simulation tests were conducted to evaluate the extent of variation in cash flow, given different contract conditions. Results revealed that, in some cases, the variation in procurement routes has a significant effect on contract cash flows.

Citation

KAKA, A.P. and KHOSROWSHAHI, F. (1996), "Effect of different procurement routes on contractors' cash flows", Engineering, Construction and Architectural Management, Vol. 3 No. 1/2, pp. 133-145. https://doi.org/10.1108/eb021027