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Cormac APC Competency Questions > 1. CL3- Commercial management of Construction > Flashcards

1. CL3- Commercial management of Construction Flashcards

1
Q

What types of estimates are there?

A

a) Budget .
b) Cost estimate – point in time “this is what I think the project will cost”.
c) Cost plan – cost plan is live.

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2
Q

What is a feasibility estimate?

A

• A high level exercise to assess whether a project is financially viable and to set an outline budget for the scheme.

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3
Q

What information do you need to be able to carry out a feasibility estimate?

A
  • Type of building (function)
  • New build or extension
  • Location
  • Size
  • Indication of quality
  • Site visit
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4
Q

What is a cost estimate?

A

• A forecast of the possible cost of a building based on historical data.

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5
Q

What are the principal components of a cost plan?

A
  • Construction cost.
  • Preliminaries.
  • Contractor’s OH&P.
  • Contingency.
  • Inflation.
  • Assumptions – programme.
  • Exclusions and assumptions.
  • Area Schedule.
  • Basis of Estimate – drawings / specifications list.
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6
Q

What is a development budget

A

The client’s total budget for the entire project – which is useful to deem whether the project is viable and profitable:
- Construction cost

  • Land and property acquisition costs
  • Approval fees
  • Planning costs – S106 and CIL
  • Financing costs
  • Site investigations
  • FFE
  • Moving staff
  • Insurance
  • Consultant fees
  • Inflation
  • Contingency
  • VAT
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7
Q

How do you proceed if the cost plan exceed s the project budget?

A

I would analyse the costs to assess the source of the increase and identify whether any element of work is abnormally high against the order of cost estimate .
When the reason for the overspend is identified I would then look to propose value engineering options to my client and design team to bring the forecast back in line with the project budget.

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8
Q

What is a functional unit?

A
  • The ‘factors which express the intended use of the building better than any other’.
  • E.g. number of bedrooms in a hotel, number of beds in a hospital.
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9
Q

What is a cost plan?

A

•Cost plan is a detailed plan of costs for the works

The cost plan presents the estimated cost of the development into an elemental or functional format.

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10
Q

What is contingency?

A

• A sum included in the estimate to cover unknown expenses or unmitigated risks during the project.

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11
Q

How is contingency assessed?

A
  • The amount included should reflect the risks and unknowns specific to the project.
  • During early estimates when little information is available it is common to include a higher.
  • Design risk, construction risk.
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12
Q

How would you establish a project budget?

A

• Comparison with similar projects.
• Assessment of funds available.
• Cost plan handover and setting up of the construction budget.
o Amend and revise costs based on changes from cost plan stage to construction stage
o Establish fees & contributions
o Establish build costs
Quantify detailed design.
Benchmark rates from similar projects.
 Market rates and quotes.
Schedule of prelims based on resources and construction programme.

o Set contingency for design development and unknowns throughout construction phase.

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13
Q

What is the purpose of a cash flow?

A
  • Provides client / finance with forecast of likely expenditure, to allow finance to be raised.
  • Provides comparison to actual certification, aids monitoring of programme etc
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14
Q

How would you create a cashflow forecast?

A
  • Apply established project construction budget to the scheduled programme of works. This includes prelims, fees & contributions, BoQ values and contingency.
  • Exercise should result in an S curve.
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15
Q

What is the Purpose of Cost Reporting

A
  • The purpose of cost reporting is to inform the likely outturn cost of the construction project.
  • To report against budgeted values and act as a working cost check on the project budget.
  • To give the Client an understanding of any savings or additional monies required.
  • To report on contract progress against pre-contract predictions.
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16
Q

What elements do you report against in your cashflow

A 
Elements covered:
•Fees & Contributions
  o	Post planning fees
  o	Hombond fees
  o	Financial contributions
  o	Utility Fees
•Build Costs
  o	Site development
  o	Apartments
  o	Prelims
  o	Abnormals
•Contingency

Contains:
• original budget set at cost plan handover.
• projected final account figures all elements.
• Compares variances between PFA and budget.
• Compares variances between previous pfa and current PFA.

17
Q

What is value engineering?

A

Value engineering is an exercise that involves seeking the most cost effective solutions in design and subsequent implementation of that solution into the design for project delivery.nce or delivery.

18
Q

What happens throughout the VE process?

A
  • Design team / Project team brought together – QS, Arch, Eng, Contractor etc.
  • Pool expertise to come up with best solution from a design, buildability and cost efficient perspective.
  • Not a cost cutting exercise as this leads to reduced quality and value.
19
Q

What is Loss and Expense

A

Contractor claims for direct loss/or expense as a result of the progress of works being affected by relevant events which the client is responsible for such as:

  • Failure to give contractor possession of the site – RIAI TIME & COST
  • Delays in receiving instructions – RIAI TIME & COST
  • Instructed variations – RIAI TIME & COST
  • Force Majeure – RIAI TIME ONLY
  • Exceptionally inclement weather – RIAI TIME ONLY
20
Q

How would you ascertain value of L&E?

A

Depends on the relevant event and what way the contract is set up?
• Is it time? Is it time and cost?
• Does the L&E arise from:
• Legislative enactments
• Late possession
• Delays in receiving instruction
• Force Majeure

21
Q

How Would you value a variation

A

I. Existing similar BoQ rates
II. Pro-rata of existing similar BoQ rates
III. Similar market rates in the locality
IV. Dayworks
V. Rate build up from first principles

22
Q

What is contingency?

A

• A sum included in the estimate to cover unknown expenses or unmitigated risks during the project.

23
Q

How is contingency assessed?

A

•- Contingencies are downside risk estimates that make allowance for the unknown risks associated with a project.

  • Sometimes based on a percentage
  • Adverse weather, unforeseen circumstances, disputes, supplier failure, variations, unexpected site conditions
24
Q

What is risk defined as?

A

• An uncertain event that may effect on the achievement of the project objectives measured in terms of likelihood (probability) and consequence (impact).

25
Q

Why is risk management needed in construction?

A
  • Projects are typically complex, all have time, cost and quality targets which must be met.
  • Risk is present in all projects and surveyors are routinely involved in making decisions which have a major impact on risk.
  • Risk management cannot eliminate risk, but techniques can be used to reduce the impact of events that may cause failure to reach the desired targets.
26
Q

What are the stages of Risk Management?

A
  • IDENTIFY
  • RESPOND
  • ANALYSE/ ASSESS
  • MONITOR AND CONTROL
27
Q

Can you give me some examples of risk in a construction project?

A
  • External risks: economic, legal, political
  • Financial risks: exchange rate, funding
  • Site risks: Restricted, occupied site, planning difficulties, access, environmental
  • Client risks: lack of experience, multi-headed client, likelihood of post contract changes.
  • Design risks: inappropriate consultant team, poor brief, incomplete design, co-ordination.
  • Selection of appropriate contractor: inadequate selection process
  • Construction and delivery risks: weather
28
Q

How do you report/ monitor risks?

A
  • Using a risk register: Risks are logged, tracked through the life of the project.
  • Item: Threats/ Opportunities likelihood/ impact. Placed in a category e.g. client control, share.
  • Needs regularly updating
29
Q

What are the benefits of risk management?

A
  • Increased confidence in achieving project objectives and success
  • Surprises reduced cost/ time overruns
  • Team understands and recognises the use and composition of contingencies
  • Enable decision making to be made on an assessment of known variables available
  • Risk management workshops can facilitate team development and encourage communication

Cormac APC Competency Questions (6 decks)

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