Title:
Expectation
of Cash Flow For Road Construction Projects in Egypt
Author: Rana Hazem Fouda
Collection: M.Eng. Structural
Abstract:
This
paper presents a cash flow prediction model for road projects. This model based
on the analysis of actual current invoices and payments data of road
construction projects. Initial results indicate that this simple model predicts
future cash flows better than models based on current cash flows alone. In this
study the main concern is to look at highway road tender projects. This
investigation could be used by road authorities who manage multiple projects.
It could be used to provide a tool to forecast future project payments. Recent
account summaries of General Authority for Road, Bridges and Land Transporting
(GARBLT) projects from 2003 to 2012 were analyzed. This data is used for
creating mathematical models representing monthly payments for various
projects. Financial data for cost estimates are collected from 28 highway road
tender projects (including 16 highway strengthening tender projects and 8
highway overlay tender projects). The data were organized into categories of
project types and subcategories of project contract amount. A seventh degree
polynomial regression analysis was run on the data and the regression curve.
Statistically equations were taken to be the forecast payment curve. Finally, a
computer program (Excel sheet) was developed to implement the results of the
investigation. This sheet was named as Multi Road Projects Cash Flow Model (MRP
_ cash flow model). The methodology provided will help all highway agencies to
apply their own projects to better predict projects cash flow and trends. This
investigation might also benefit researchers in projecting cash flows and
trends. Also any agency could provide improvements for the model. After that
the model was fitted. The tender information concept was applied to analyze and
diagram cash flow estimations for the execution stage of contracted projects.
The goal is to understand short-term financial demands that occur during the
execution stage. Also, using this model leads to a better understanding
bankruptcy of cash flow problems. The analysis of the model application is
simple. All the calculations can be done with a trial balance software package
such as Excel. In practice, owners of the road projects can use the model to
preview the cash distribution and amount demanded before projects are executed.
Once construction is under way, data from the actual project cash flow can be
used to update and revise the predictions. The results of the MRP model depends
on real payments data of road construction projects as mentioned above. It
means that delays and ordinary obstacles are taken into account. These delays
and obstacles were created by the surrounded environment. These delays has a
great effect on the road construction projects as constructing of roads demands
dealing with other authorities, citizens of the country, weather, natural
disasters and also executing problems. Sometimes there is an unexpected
obstacle that appears during the execution of road construction projects. It
could be a reason of a long delay in the time table of the project. Off course
this delay affects the cash flow plan of the project which is not considered in
our cash flow model. Claims in construction road projects are hard to be
expected and need a detailed study. So, the MRP cash flow model ignored this
claims. The aim of this model is to have a future expectation of the cash flow
for several road projects without taking any claims into account. This point
could be a good entrance for future researches that studies cash flow
expectation.
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