Abstract:
The main objective of this report is to illustrate the effect of changes in the pattern of cash flow on the profitability of a building project. Secondary objectives are to consider the need for a non-computer method for effectively evaluating the cash flow characteristics of major projects when tendering, to identify important contract conditions, aspects of estimating strategy, project planning and control, financial and accounting policies which affect cash flow on building work, and to assess the techniques currently used by building and civil engineering contractors in South Africa to determine tender mark-up and project cash flow and planning and control. The study consider the current liquidity problems on the construction industry and typical determinants of cash flow on construction projects. The principles and use of the computerised Project Cost Model technique are described. The tender records of a specific project constitute the framework for the base data of sensitivity analyses carried out. From the survey it is not concluded that the techniques demonstrated and the results of the sensitivity analyses should enable construction companies to decide whether their performance could be enhanced by using either or both the cost models to monitor and measure cash flow where financial resources are employed.
