Planning for performance bonds in public construction projects to protect owners and maintain contractors’ willingness to bid

Purpose The cash flow from government agencies to contractors, called progress payment, is a critical step in public projects. The delays in progress payments significantly affect the project performance of contractors and lead to conflicts between two parties in the Turkish construction industry. Although some previous studies focused on the issues in internal cash flows (e.g. inflows and outflows) of construction companies, the context of cash flows from public agencies to contractors in public projects is still unclear. Therefore, the primary objective of this study is to develop and test diverse machine learning-based predictive models on the progress payment performance of Turkish public agencies and improve the predictive performance of these models with two different optimization algorithms (e.g. first-order and second-order). In addition, this study explored the attributes that make the most significant contribution to predicting the payment performance of Turkish public agencies. Design/methodology/approach In total, project information of 2,319 building projects tendered by the Turkish public agencies was collected. Six different machine learning algorithms were developed and two different optimization methods were applied to achieve the best machine learning (ML) model for Turkish public agencies' cash flow performance in this study. The current research tested the effectiveness of each optimization algorithm for each ML model developed. In addition, the effect size achieved in the ML models was evaluated and ranked for each attribute, so that it is possible to observe which attributes make significant contributions to predicting the cash flow performance of Turkish public agencies. Findings The results show that the attributes “inflation rate” (F5; 11.2%), “consumer price index” (F6; 10.55%) and “total project duration” (T1; 10.9%) are the most significant factors affecting the progress payment performance of government agencies. While decision tree (DT) shows the best performance among ML models before optimization process, the prediction performance of models support vector machine (SVM) and genetic algorithm (GA) has been significantly improved by Broyden–Fletcher–Goldfarb–Shanno (BFGS)-based Quasi-Newton optimization algorithm by 14.3% and 18.65%, respectively, based on accuracy, AUROC (Area Under the Receiver Operating Characteristics) and F1 values. Practical implications The most effective ML model can be used and integrated into proactive systems in real Turkish public construction projects, which provides management of cash flow issues from public agencies to contractors and reduces conflicts between two parties. Originality/value The development and comparison of various predictive ML models on the progress payment performance of Turkish public owners in construction projects will be the first empirical attempt in the body of knowledge. This study has been carried out by using a high number of project information with diverse 27 attributes, which distinguishes this study in the body of knowledge. For the optimization process, a new hyper parameter tuning strategy, the Bayesian technique, was adopted for two different optimization methods. Thus, it is available to find the best predictive model to be integrated into real proactive systems in forecasting the cash flow performance of Turkish public agencies in public works projects. This study will also make novel contributions to the body of knowledge in understanding the key parameters that have a negative impact on the payment progress of public agencies.

In recent years, several studies have attempted to explain the positive link between corporate investment and internal cash flows by hypothesizing the existence of asymmetric information. Managers know that the firm has high return investment opportinities, but the capital market does not. An alternative explanation for cash flow's relationship to investment is that managers have the discretion to use the company's cash flows to advance their own interests, and these are positively linked to the growth of the firm. The asymmetric information hypothesis predicts a positive relationship between investment and cash flow for firms with returns on investment above their costs of capital, the managerial discretion hypothesis predicts a positive relationship for firms with returns below their costs of capital. This paper presents evidence consistent with both hypotheses.

An analysis of the scientific literature on project cash flow control and fuzzy modelling shows that project cash flows are modelled using only basic approaches drawn from fuzzy theory, which may distort the credibility of the model. In this paper, we therefore propose to use the whole spectrum of fuzzy arithmetic, and to select operations that suit the nature of the cash flows in question, their dependencies and the preferences of the project manager. An analysis of the literature also shows that in practically all existing models of project costs and cash flow management, project costs and cash flows are treated at a very high level of generality (without considering the various types of project, factors influencing their variability and signals warning of imminent cash-related problems), and estimations are not updated on an ongoing basis throughout the duration of the project. The results of a survey performed with the participation of 100 project managers show that this simplistic view of project cash flows may be distorting, and cannot guarantee the development of an efficient project cost and cash flow control system. We propose an approach that at least partially compensates for these drawbacks: it differentiates between types of project cash flows and the factors and triggers affecting changes in cash flows. Two case studies are used for a an initial verification of the approach. The paper concludes with suggestions for further research perspectives.

This research aims to test and analyze the influence of internal cash flow, sales growth, and firm size on the capital expenditure of telecommunication companies at the Indonesian Stock Exchange 2017-2021. The method used in this research is quantitative. The data used is secondary data, namely the financial reports of telecommunications companies, which are the population in this study. The sample used was 14 companies using the purposive sampling method. The analysis method uses panel data regression analysis using the Eviews 12 application. The research results show that internal cash flow has a significant influence on capital expenditure in telecommunications companies listed on the Indonesia Stock Exchange in 2017-2021. The greater the company's internal cash flow, the greater the company's capital expenditure. Sales growth has a significant influence on capital expenditure in telecommunications companies listed on the Indonesia Stock Exchange in 2017-2021. When sales growth increases, network users increase, so an adequate network is needed, and requires capital expenditure to meet network development needs. Firm size does not have a significant influence on capital expenditure in telecommunications companies listed on the Indonesia Stock Exchange in 2017-2021. The larger the company, the greater the capital required for the company's operational activities.

Construction contracts have been widely acknowledged to be capital intensive, complicated, and risk prone. The purpose of the study is to assess risk factors affecting contractors’ cash flow for construction projects and examine their influence on contractors’ cash flow projections. In line with quantitative survey approach adopted for the study, 193 copies of a structured questionnaire were administered while 130 valid responses were received to give a response rate of 67.4%. Data collected were analysed using descriptive statistics and Kruskal Wallis. Findings indicate that the 5 top rated risk factors affecting contractor’s cash flow were ‘delay in payment by client’, ‘delay in delivery of materials’, contractor’s lack of resources, exchange rate, and inflation while the 5 least rated risk factors by respondents were currency of cost data, disagreement over retention, over valuation, adjustment of prime cost sums, and force majeure. It was also discovered that ‘contractor’s lack of resources’ had the highest severity of influence according to the view of respondents. The study concludes that cash flow projections of contractors handling construction projects in south-south Nigeria are prone to risks, most of which are significant. However, it was established that the five top risks which should be of concern to contractors are delay in payment by client, delay in delivery of materials, contractor’s lack of resources, exchange rate, and inflation. The study recommends that contractors and other stakeholders could consider putting in place risk control measures to counter those risks identified in this study as likely to have high severity of influence on cash flow with a view towards bolstering project delivery.

The article is devoted to the justification of the theoretical and methodological foundations of the cash flows and their role in the financial management of the insurance company. As a result of the analysis of the domestic economic literature, a rather low level of research of the issues and problems related to the cash flow of the insurance company has been revealed. It has been noted that the economic content of the insurer's cash flows is determined by the peculiarities of the financial relations in the insurance business, the material basis of which is the circulation of the financial resources caused by the movement of funds, mainly in the monetary form. It has been emphasized that the effective management of the cash flows is the key to ensuring the financial stability and liquidity of the insurer. In order to determine the definition of the concept “cash flow of the insurance company”, its essential features have been defined, the essence and content of the cash flows from the operational, investment and financial activities of the insurance company have been revealed. It has been established that the scientists consider the cash flow from the different points of view: as the net profit; as the difference between the funds received and paid by the enterprise for a certain period (thereby the cash flow is equated with the balance of funds); as cash flows in the form of receipts and payments for a certain period. We believe that the selection of only one approach will be incomplete, and depending on the tasks of financial management, it is advisable to use different approaches to determine the cash flow. It has been established that there is no clear distinction between the concepts of “cash flow” and “financial flow” of the insurance company, and questions regarding their essence remain debatable and require certain clarifications. Based on the analysis of the concept “cash flow of the enterprise” and the systematization of the concept “cash flow of the insurance company”, it is proposed to consider the cash flow of the insurance company as the continuous process of cash movement and their equivalents in the form of their receipts and use (outflow) for a certain period in the process of operating, investment and financial activities. The characteristic features of the insurer's cash flow have been determined. The external and internal factors affecting its cash flow have been highlighted. It has been emphasized that in order to ensure effective management of the insurer's cash flows, it is necessary to systematize them according to certain classification features, each of which has practical significance. The classification of cash flows in the insurance company has been clarified.

Changes in commodity prices and input costs along with adjustments in capital structure significantly affect farm cash flow requirements and whole farm profitability. These changes coupled with crop yield and price variability increase the need for farm business cash flow and profitability planning on a whole farm basis. Planning for profits is expected to affect both the short and long run success of the business and cash flow planning is expected to allow the manager to establish farm business cash needs for a specified period of time (production period) so that cash commitments are met as they come due. Furthermore, agricultural lenders have become increasingly concerned with loan repayment capacity and are placing relatively more emphasis on cash flow analysis in the loan evaluation process. In general, farm managers who develop cash flow and profitability projections should find it easier to justify and to secure adequate financing for their businesses. The purpose of this report is to supplement the series of annual cost projections for enterprises by providing profitability and cash flow projections for several whole farm situations throughout the state. Whole farm projections of returns and expenses are expected to provide information regarding the relative profitability of individual farming situations throughout the state. Estimates from cash flow projections provide information concerning the timing of cash flows and the distribution of cash flows for individual farm situations and comparison of estimates for these situations provide an indication of the relative cash flow positions of farms across the state. These projections are expected to be of value to farmers, agricultural credit agencies, extension personnel, researchers, and other professionals with an interest in the agricultural production industry. This report is organized into three general parts. Data sources and procedures used in the study are presented in the first section. In the second section, projected income and cash flow statements for representative farms in major crop producing areas of the state are presented and discussed. The final section summarizes the financial projections for representative farms considered in the study.

With the existence of information asymmetry, the actual capital market is not perfect and the external financing cost is higher than that of internal funds obviously. Thus firms face the financing constraints when external financing. Using internal cash flow to reflect the internal financing capability, we create a model to analyze the sensitivity between the debt financing and internal cash flow when firms facing different degrees of financing constraints. On the basis of the analysis, two main conclusions can be drawn from the empirical research: 1. the debt financing is remarkably negative related to the internal cash flow; the more internal cash flow, the less the debt financing will be. 2. The financing constraints can affect the sensitivity between the debt financing and internal cash flow. There is a high sensitivity between debt financing and internal cash flow when firms face strong financing constraints, and the sensitivity decreases as financing constraints become week

In order to test how financing factors influence the investment of Chinese listed companies, a theoretical and empirical analysis is conducted to prove the effects of internal cash flow on the corporate investment based on Chinese system background. The research shows that underinvestment will occur when free cash flow is low; otherwise, overinvestment will occur, under both circumstances, the corporate investment is sensitive to internal cash flow. As internal cash flow in non-state-holding enterprises is higher than that in state-holding enterprises on the average, and non-state-holding enterprises face more financing constraints, therefore, the investment is more sensitive to cash flow in non-state-holding enterprises than in state-holding enterprises. That provides evidence for perfecting investment and financing system and corporate governance mechanism to improve investment efficiency in Chinese listed companies.

Bid evaluation, an important part of bidding activities, is the most critical part to determine the quality of bidding. For large volume and complex technology projects, the comprehensive evaluation method is usually used in China. It is known that the selection of bid evaluation method has a great influence on the quality of bidding. In the face of the basic situation of China, although the comprehensive evaluation method is basically competent for the bidding work, it still has the defects of human factors in the evaluation of the bid. Therefore, it is essential to improve the bidding evaluation method. This paper mainly evaluates the bid evaluation activities of construction projects based on the comprehensive weighted evaluation method. Through the accumulation of relevant theoretical and practical research results, the author sorts out the advantages and disadvantages of various evaluation methods and analyzes the scientificity, fairness, and practicability of the established project bidding as well as the evaluation model in the evaluation of bidders through the actual project bidding and evaluation case. Combined with the mathematical model and case analysis, the bid evaluation activity is solved by the computer program, and the conventional bid evaluation results and the mathematical model evaluation results are compared to get more accurate bid evaluation results.

Contractors usually prepare a project cash flow (PCF) on construction projects. The flow of cash in and cash out within a construction project may vary depending on the owner, contract documents, and construction service providers who have their own authority. Other factors affecting the PCF are down payment, termyn, progress schedule, material schedule, equipment schedule, manpower schedules, and wages of workers and subcontractors. This study aims to describe the cash inflow and cash outflow based on the empirical data obtained from contractors, develop a PCF model based on Halpen & Woodhead’s PCF model, and investigate whether or not there is a significant difference between the Halpen & Woodhead’s PCF model and the empirical PCF model. Based on the researcher’s observation, the PCF management has never been implemented by the contractors in Malang in serving their clients (owners). The research setting is in Malang City because physical development in all field and there are many new construction serv...

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In 2015, the Slovak Parliament adopted the Law on Amendments to the Law on Value-Added Tax. This law came into force on January 1, 2016. One of the most significant changes was the introduction of a reverse-charge for the provision of construction works. A government statement of its positive influence on the business environment is inconsistent with the two-year experience in the building sector. The main goal of this paper is to establish the reason for the practical effects of the value-added tax reverse-charge mechanism on the construction companies. The hypothesis is that the negative effect on the cash flows of the construction companies increases ‘opportunity costs’ connected to excessive deductions. The paper focuses on evaluating and quantifying such an effect. It presents a comparison of the conditions before and after the adoption of the Act. No. 222/2004 Coll., as amended in 2016 and includes factors that influence costs and cash flows of construction companies. It but does not consider factors related to turnover and the economic situation. The reverse-charge mechanism affects the total of tax owing, the total deductible tax, the total excessive deduction, and the construction companies’ cash flows. In this study, the data from the information system of the Slovak Republic, under the condition of anonymity, are analyzed for the period 2014–2017. The effect of the value-added tax is quantified by way of financial interest expenses. These expenses depend on time limits for the excessive deduction, total of tax owing, and on the excessive deduction amount. Indicators of ‘Financial Burden 1’ and ‘Financial Burden 2’ are calculated. The results show that the Law on Amendments of Value Added Tax has significantly affected the constructions companies since January 2016. The reverse-charge system has not changed the delay in excessive deduction payments to the taxpayer’s bank account. It has changed the amount of excessive deduction expressed through money and the total tax owing. Based on the study results, this change markedly affects the financial burden of construction companies and provides an ‘opportunity cost’ Value Added Tax payers‘ construction company.