Fuzzy Uncertainty Modelling in Cost and Cash Flow Forecasting in Project

Abstract

Numerous projects (e.g. more than 50% of IT projects) are not finished within budget and cause serious financial problems to the organisations implementing them. It is thus important to be able to predict the cost of projects and cash flows related to them early enough, in order to be able to assess with the necessary anticipation whether the necessary financial means will be available on time and if not, to take in time the necessary measures to solve the menacing problem. In the paper the sources of uncertainty with respect to project cost and cash flows will be identified and their modelling by means of fuzzy sets will be proposed. Such issues neglected in the project management literature as various taxes, duties and impositions, which belong to the area in which project managers are not experts and where they do not follow the detailed regulations, will be discussed too. They are of high importance, because legal changes in this area come often as a surprise for project managers and lead to serious liquidity problems. The approach will be illustrated with a real world case study, in which one of the authors was the member of the project team.