Development and evaluation of a company-level budgeting technique incorporating future construction contracts

One of the main challenges facing construction contractors is incorporating future, unknown contracts into their annual financial budgets. This paper reviews current academic work in this area and argues that computer based simulation techniques are too complex to be adopted in the industry. Therefore, an alternative and a more simple technique need to be developed and evaluated for accuracy and usefulness. The paper demonstrates that as the pattern of winning construction contracts lacks any seasonality, it may be possible to assume all future work to be starting on one point in time, and by using an average standard value build up curve, average duration and the total value work needed, contractors may be able to estimate the number of contracts they will need to win over the following year. The paper evaluates the above assumption through hypothetical scenarios (developed using a detailed computer based simulation model) and two real case studies whereby company-level project data were analysed. Results showed that assumption of no seasonality needs to be revised and that a method by which a company specific average staring date is calculated should be developed.