Forecasting the cash on a 56 day cycle

On the large FIDIC contracts running under Vision 2030, the gap between doing the work and being paid for it is long and fixed. Under Sub-Clause 14.7 the Employer pays within 56 days of the Statement. A Contractor who forecasts cash as if payment were immediate will build a funding plan that is wrong by nearly two months, and on a project of this scale that error is measured in tens of millions.

Start from the payment cycle, not the programme

The programme tells you when the work happens. The cash forecast is a different curve, shifted right by the payment lag. Value the work in a period, add 56 days, and that is roughly when the money for it arrives. Every forecast that ignores this shift overstates the cash position for the first two months of the job, which is exactly when the funding risk is highest.

What comes off before the money lands

• Retention. A percentage held on every certificate under Sub-Clause 14.3, not returned until Taking-Over and the end of the Defects Notification Period. It is earned value you do not receive for months or years.
• The certification gap. The Engineer may certify less than the Statement. Forecast on the amount likely to be certified, not the amount claimed.
• VAT timing. The fifteen per cent is collected and paid onward. It flows through the account but it is not margin, so keep it separate in the forecast.

The Ramadan and Eid effect

FIDIC counts in calendar days, so the holidays do not extend the statutory dates. They do affect the pace of certification and payment processing in practice. A Statement submitted just before a long holiday is legally on the same clock, but the Employer processing may run to the deadline rather than ahead of it. A prudent forecast assumes payment near the end of the 56 days around these periods, not the middle.

Model the trough

Every project has a point of maximum funding need, where the most work has been done for which no money has yet arrived. On a FIDIC job that trough is deepened by the 56 day lag and by accumulated retention. Finding it in advance is the whole purpose of the forecast, because it tells the Contractor how much working capital the job actually demands before it starts paying for itself.

The discipline

Build the forecast from the valuation cycle, shift each period by the payment lag, strip out retention and VAT, and forecast on the certified figure rather than the claimed one. Update it every month against what was actually certified and paid. A forecast that is reconciled to reality each cycle is one that predicts the next trough instead of explaining the last one.