The Impacts Of The Contractor's Financial Constraints On The Client's Payment Scheduling Problem

In order to improve the efficiency of the project and formulate good partnership,many aspects of a project can be negotiated by participants of the project.Progress payments are an important issue to the client and contractor in that they have great impact on activity schedules,the expected return and project finances.The milestone payment pattern has advantages in incentivizing contractor and progress control.Under this approach,inappropriate time of payments or distribution of amount of payments over events usually leads to mismatch between the amount of payments received by the contractor and the overall progress of a project.Therefore,the inclusion of the contractor's financial constraints may solve this problem.In this paper,the amount,timing,location and number of payments are simultaneously determined from the client's view while considering the contractor's financial constraints(the minimum NPV the contractor requires and the maximum fund gap he can afford).We investigate the client's payment strategies due to different levels of the financial constraints of the contractor under the milestone payment pattern.It is shown that the client has different preferences for the progress of project and distribution of payments to cope with different combination of NPV and financial capacity of the contractor.What's more,contrary to previous researches,the client benefits from offering lower retention and there exists an optimal number of payments in different circumstances.