A Linear Programming Model For Cash Flow Management In The Brazilian Construction Industry

A linear programming model has been developed for optimal cash flow management addressing specific cash flow issues related to the construction in industry. These include financial transactions, possible delays on payments, use of available credit lines, effect of changing interest rates, and budget constraints that often occur in the construction industry. A small size project from the Brazilian construction industry is provided as a case study, aiming at evaluating the potential benefits from using the model. Different changes to the basic structure of the model allow and establish the consistency of the results. Alternative formulations are suggested to deal with uncertainties, longer planning horizons, and multiple subcontractors and suppliers. In addition to the tangible financial earnings derived from the optimization process, the simple structure of the model, as a network flow and corresponding equations, provides much visual insight concerning the relationships between the external inputs and the variables of the problem. Optimal results have yet to be achieved in a real life situation, but a better view of whole cash flow management is provided when using the model.195469479Adeli, H., Karim, A., Scheduling/cost optimization and neural dynamics model for construction (1997) Journal of Construction Engineering and Management, 123 (4), pp. 450-457Ahuja H.N. Construction Industry Conference Industry Committee, Sao Paulo, (1976) Construction Performance Control By Networks, , Wiley, New YorkAshley, D.B., Teicholz, P.M., Pre-estimate cash flow analysis (1977) Journal of Construction Engineering and Management, 102 (3), pp. 369-379Bennett, H., Ormerdo, R.N., Simulation applied to construction projects (1984) Construction Management and Economics, 2, pp. 225-263Birge, J.R., Louveaux, F., (1997) Introduction to Stochastic Programming, , Springer Series in Operations ResearchCollier, C.A., Halperin, D.A., (1984) Construction Funding: Where the Money Comes from, , Wiley New YorkCusack, M.M., The use of integer programming for modeling project control information (1985) Construction Management and Economics, 3, pp. 91-104Dembo, R., Six rules for mark-to-future (1999) Algo Research Quarterly, 2 (2), pp. 11-13(1999) Housing, Infrastructure and Employment, 3rd Brazilian, , FIESP, Industry Federation of the State of Sao Paulo, ConstructionFourer, R., Gay, D.M., Kerningham, B.W., (1993) AMPL: A Modeling Language for Mathematical Programming, , Boyd and Fraser, Danvers, MTGill, P.G., (1968) Systems Management Techniques for Builders and Contractors, , McGraw-Hill, New YorkGolden, B., Liberatore, M., Lieberman, C., Models and solution techniques for cash flow management (1979) Computers and Operations Research, 6, pp. 13-20Harford, J.V., (2000) Corporate Cash Management, Excess Cash and Acquisitions, , Garland Publishing, New YorkKaka, A.P., Towards more flexible and accurate cash flow forecasting (1996) Construction Management and Economics, 14, pp. 35-44Kaka, A.P., Price, A.D.F., Net cash flow models: Are they reliable? (1991) Construction Management and Economics, 9, pp. 292-308Karshenas, S., Haber, D., Economic optimization of construction poject scheduling (1990) Construction Management and Economics, 8, pp. 135-146Langford, D., Iyagba, R., Komba, D.M., Prediction of solvency in construction companies (1993) Construction Management and Economics, 11, pp. 317-325Li, H., Love, P., Using improved genetic algorithms to facilitate time-cost optimization (1997) Journal of Construction Engineering and Management, 123 (3), pp. 223-237Malburg, C.R., (1992) The Cash Management Handbook, , Prentice Hall, Englewood Cliffs, NJNahapiet, H., Nahapiet, J., A comparison of contractual arrangements for building projects (1985) Construction Management and Economics, 3, pp. 217-231Navon, R., Resource-based model for automatic cash flow forecasting (1995) Construction Management and Economics, 13, pp. 501-510Navon, R., Company-level cash-flow management (1996) Journal of Construction Engineering and Management ASCE, 122 (1), pp. 22-29Sears, G.A., CPM/COST: An integrated approach (1981) Journal of Construction Engineering and Management ASCE, 107 (2), pp. 227-238Tucker, S.N., A single alternative formula for Department of Health and Social Security S-curves (1988) Construction Management and Economics, 6, pp. 13-23Werna, E., The concomitant evolution and stagnation of the Brazilian building industry (1993) Construction Management and Economics, 11, pp. 194-20