Synthetic cash flow model with singularity functions for unbalanced bidding scenarios

Abstract

Construction contractors may utilize unbalanced markup bidding strategies, e.g. front-loading, to seek more beneficial cash flows, or even protect their target profits. A difference between ethical and unethical unbalanced bidding is whether the bid has been mathematically or even materially modified: the former may be allowable, but the latter should be rejected, as it fails to cover even the cost of later activities. Unbalanced bidding adds to the complexity of cash flow models and requires a new model that can calculate different scenarios accurately and efficiently. Basic new theory is explored for unbalanced bidding in cash flow models by employing the range-based class of singularity functions. First, a new synthetic balanced cash flow model that can accurately consider the time value of money (TVM) and retainage is derived to serve as the foundation; second, various unbalanced markup functions including two-phase, linear, and non-linear types are defined both cumulatively and non-cumulatively; third, the performance of the extended synthetic cash flow model for unbalanced bidding is investigated mathematically.

Keywords:

• Bidding
• cash flow analysis
• cash flow management
• singularity functions
• unbalanced bidding.

Acknowledgement

The support of the National Science Foundation (Grant CMMI-0927455) for portions of the work presented here is gratefully acknowledged. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily represent the views of the National Science Foundation.

Disclosure statement

No potential conflict of interest was reported by the authors.