Construction Projects Cash Flow and the Progress Payment Cycle
Saleh Mubarak, Ph.D.
- Construction project management professional, professor, consultant, author, public speaker, and trainer.
- Ph.D. in civil engineering from Clemson University, USA, specialized in Construction Project Management.
- Experience: 30+years,diversified:
o Industrial: private and public sectors, in the U.S. and international. Positions occupied include project engineer / manager, cost estimator, planner / scheduler, project controls manager, cost manager, training manager.
o Academic: faculty member / professor, head of department. - Extensive experience in continuing education and professional training around the world.
- Author of:
o Construction Project Scheduling and Control, 4th edition
o How to Estimate with Means Data: Basic Skills for Building Construction, 5th edition.
o Many articles; technical and other - Many presentations in professional conferences such as PMI, AACE International. Public speaker in many local, regional, and international events.
- An authority on project planning, scheduling, and project control.
- An advocate of holistic healthy living
The seminar starts with definitions and the importance of cash flow diagrams, mainly for contractors. Secondly, we go into preparing these diagrams and updating them. Several issues and scenarios will be discussed. Thirdly, we explain the cycle of progress payment requests and connect it to cash flow diagrams. Lastly, we discuss the importance of these diagrams and mutual impact on other aspects of the project such as schedule acceleration, claims and other delays.
Areas Covered
1. Impact of type of contract, who bears most of the risk?
- Lump sum, unit price
- Cost-plus-fee
2. Before the start:
- Need an itemized quantity take-off and cost estimate
- Need schedule of values
- Need CPM schedule; resource / cost loaded
- From the above, the contractor can draw the expected cash flow diagram: Calculate the impact of borrowing money and maximum debt
- The owner can also draw their expected cash flow diagram
3. After the start:
- Need regular updates with % complete estimated per activity
- Need schedule of values, updated if applicable
- The process of progress payments: at the GC’s side and the owner’s side
- Lien waivers/releases
- Owner: approve, reject, modify (approve except for…)
4. More related issues:
- Change orders
- Acceleration
- Advance payment
- Delays,
- Retainage/mobilization payment/advance payment
- Other terms such as purchased but not installed materials
- Cost/trust relationship
Course Level - Intermediate
Who Should Attend
This seminar is important for the entire project management team, particularly contractors, project managers, cost estimators, planners and schedulers, project controls managers, and other project management team members
Why Should You Attend
Attending this seminar gives a chance to attendees to understand cash flow diagrams; how they are prepared, implemented, interpreted, and updated. This is very crucial to the contractor as money is the nerve of operations.
Topic Background
Statistically, most failures of construction companies happen because of financial, not technical, issues; mostly resulting from failure to accurately predict and control cash flow. Construction projects cost lots of money and take a long period of time. Financing construction projects requires input from both the cost estimating and scheduling teams. Project control basically comprises comparing actual spending to the baseline budget and actual schedule to the baseline schedule. Cash flow diagrams have to be updated and synchronized with the baseline. The contractor needs to make necessary adjustments based on the actual situation on the ground.
As the contractor’s spending (cash out) continues throughout the project, progress payments from owners depend on actually performed quantities. These progress payments are the contractor’s “cash in” that is needed to sustain the project work. Failure to accurately predict both the spending and progress payments (cash in and cash out) plotted against time may hurt the contractor’s operations and the project.
There are other issues involved such as advance payment (if any), length of the approval cycle, and retainage. It takes good planning and careful project control procedures to make sure the contractor’s cash flow/finance is under control.
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$200.00
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