Delay of owner's periodic payments is one of the most important factors that causes delays in construction projects. However, under a formidable financial conditions an owner may delays her/his planned periodic payments (PI) to the contractor later than the expected date which results in extra costs and may disrupt the project's schedule. Contractors normally tend to reduce this type of delay. This paper describes the development of a model capable of determining the amount of risk associated with owner's delayed payments as a percentage of the total cost of an activity. The contractor should take this value into consideration during the bidding stage of a project given owner's reputation. The model can be used in the pre-construction stage to analyze the effect of delaying the periodic payments made by an owner on the contractor's cash flow and to quantify the consequences in terms of an allowance, as a percentage to be added to the contractor's bid estimate. A sample case study is used to demonstrate and validate the model. A comparison between the cash flow model results before and after incorporating risks had been done to show the effect of incorporating risk in cash flow. The development is based on studying current systems and incorporating current practices.

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