Portfolio Cash Assessment Using Fuzzy Systems Theory
Publication: Journal of Construction Engineering and Management
Volume 137, Issue 5
Abstract
Gaps between cash outflows and inflows throughout the life cycle of construction projects can create extended periods of low cash availability for a construction contractor, jeopardizing the financial stability of the business. A number of researchers have therefore attempted to model cash availability at a project level. However, at a firm level, financial stability is more thoroughly examined as a function of the cash flows related to multiple projects. This paper proposes a methodology on the basis of fuzzy systems theory to forecast cash requirements of a portfolio of projects for a construction firm, taking into account the effect of changing portfolio composition on portfolio cash-flow risk. Portfolio cash-flow risk is calculated from a variance matrix created by using covariance among cash flows of pairs of projects. Expert opinions of a group of highway construction contractors regarding project selection, project risk assessment and cash control were collected to create a fuzzy proportional derivative (PD) model that predicts portfolio risk for a construction firm. The model was assessed by the same group of contractors for overall logic (if/then rule base), appropriateness of cash-flow calculations (moving weights of cost categories), and practicality through application on a hypothetical test case. The paper concludes that a fuzzy proportional derivative model can be an effective tool to establish trends in cash-flow availability and risk across a portfolio of construction projects.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 137 • Issue 5 • May 2011
Pages: 333 - 343
Copyright
© 2011 American Society of Civil Engineers.
History
Received: Jun 4, 2009
Accepted: Sep 29, 2010
Published online: Apr 15, 2011
Published in print: May 1, 2011
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