Dabirian, S; Ahmadi, M and Abbaspour, S (2023) Analyzing the impact of financial policies on construction projects performance using system dynamics. Engineering, Construction and Architectural Management, 30(3), pp. 1201-1221. ISSN 0969-9988
Abstract
Purpose: The research aims to analyze the effects of financial policies on a cash flow system to meet project performance goals and improve profitability. The policies are divided into four groups; owner related, bank-related, labor-related and supplier-related policies. This research presents a developed model for planning, forecasting and managing the cash flow in construction projects using system dynamics (SD). Design/methodology/approach: A System Dynamics (SD model is developed to evaluate the effect of different financial policies on construction project performance. By identifying the feedback loops in the cash flow system, a dynamic model is developed to forecast, plan and manage different policies, including prepayment, overbilling, loans, incentive payment, delay in payment and equipment lease. Findings: A case study (a construction activity as part of a pharmaceutical factory development project) is used to analyze the cash flow and financing policies. The findings demonstrate the effects of different policies such as incentive payments on project cash flow estimation, which proved to reduce the project duration, improve the profit and increase the financing during the project execution. Originality/value: The presented model would be a major attempt to estimate precisely the cash flow and the effect of employing different financial policies on project performance. Applying this model, project managers and decision-makers have the opportunity to model different financial policies concerning a variety of limiting variables applicable to each situation. Ultimately, with this, one can make more reasoned decisions and, in effect, optimize the utility of the project.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | cash flow management; construction project; cost; financial policies; system dynamics |
| Index terms: | cash flow, profit, system dynamics, construction project, methodology, feedback loop, financing, lease, cash flow management, forecasting, project manager, case study, owner, construction activity, estimation, project performance, profitability, estimate, duration |
| Subjects: | project management theory and practice, production management, research methods, financial management, land economics, sociology, project controls, control systems, computing systems, data collection methods, profession, financial and cost management, economic analysis, prediction and forecasting, construction operations |
| Topics: | Site Management, Time Control, Urban Studies, Digital Applications, Stakeholder Management, Roles and Professions, Engineering Principles, Project Management, Research Practice, Cost Management, Business Strategy |
| Descriptive scope: | 5 PCTEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here