Multi-objective optimization approach for decisions regarding contractor-to-subcontractor payment arrangements

Although some research efforts in the literature has reported the importance of considering the time interval between subcontractors? requests for payment and the actual disbursements on the cash flow calculation, very few research efforts in the literature has considered the contractor-to-subcontractor payment arrangement to help resolve the cash-available limitation problems and minimize the financing costs. The payment arrangement involves specifying the Billing Date (BD)--the time subcontractors submits their bills, and the Payment Time Delay (PTD)?the elapsed time the subcontractors receive their payments after submission of their bills. This study proposes a multi-objective optimization model which helps the contractors make decisions regarding the payment arrangements as well as the Commencement Dates (CD) of the individual work packages intended to be sublet to specialty subcontractors. The proposed method presents a set of pareto-optimal solutions which signify the impact of the factors of billing date, payment time delay, and commencement date on the contractors? cash flow. Thus, the model enables contractors to identify the solutions with high potential to reduce the cash flow overdraft and cut down the project financing costs.