Abstract

Construction projects are one of the most highly subjective fields to risks and uncertainties, particularly at the bidding stage, where the amount of information about the project is very limited. The contractor should take in consideration the amount of risk associated with the total costs of the project activities in the inception stages in order to reduce unnecessary extra costs that might occur to a project. However under formidable financial conditions, an owner may betake to delay her/his planned periodic interim payments (PI) to the contractor later than the expected date. Avoiding this kind of delay is very important for both owners and contractors. This study presents a simple mathematical model capable of predicting the amount of risk as a percentage of the total cost of an activity should be taken into consideration by a contractor during the bidding stage. However the model analyzes the effect of the delay of the periodic payments made by an owner on the contractor's cash flow and project work schedule, taking into consideration risk factors and quantifying the consequences as a percentage in term of an allowance, within the contractor's bid estimate. A sample case study is used to demonstrate and validate the model. Comparisons are made with existing models to show the effect of incorporating risk factor in cash flow. The model can be applied to any size of projects. In addition, it could be linked to delay analysis systems to enable the contractors to decrease uncertainties that happened at the pre-construction bidding stage and eventually minimize delays in construction projects.