Rapid Return on Investment by innovative Methods in Construction visualized by Cash Flow Model

The introduction of innovative methods such as automation and robotics in construction improves productivity, quality and safety of construction. Due to economic downturn and lack of economic feasibility, the development of new machinery based on construction systems during the 1990s stopped prior to achieving the necessary Return On Investment (ROI). Therefore, the authors identified that it is necessary for innovative construction methods, that the owners or clients should demand an individual profit regarding to the building construction process. In the past, the manufacturing companies harvested the benefits of productivity improvement by innovative construction methods for cost reduction. The companies did not emphasize on the profit for the owners. In this paper, the authors analyze and visualize how previous applications of innovative construction methods on relatively large-scale construction sites, changed the cash flow of the project life. A simulation, analysis, and comparison of the trade-off of various effects to cash flow, by shortening the construction period despite an increase in cost by innovative construction methods, are proposed. An analysis is developed on how big the amount of the profit benefits has to be, in order to not just benefit to owners, but also cover the expenses for research, development and management operations required to develop and implement innovative construction methods. Techniques and methods from the financial engineering field are introduced in order to evaluate profit and expense margins. The authors are also aware of the risks involved in such an evaluation, by considering the fluctuations of the rent income to be provided from the finished building using the Monte Carlo technique. The aim of the proposed cash flow approach to innovative construction methods is to set up an economic framework in which technological development can exist. The outcome of the approach shall complement technological driven approaches to innovative on-site construction methods and later serve as a basis for future technically oriented research.     «

The introduction of innovative methods such as automation and robotics in construction improves productivity, quality and safety of construction. Due to economic downturn and lack of economic feasibility, the development of new machinery based on construction systems during the 1990s stopped prior to achieving the necessary Return On Investment (ROI). Therefore, the authors identified that it is necessary for innovative construction methods, that the owners or clients should demand an individual...     »