12. CM Flashcards
What are liabilities? What do they do?
Amount that is owed to the supply chain. (If the Contractor went bust, what payment is due to the Subcontractor).
They show the financial position of the project.
Explain the cash flow process on your project. How have you prepared cashflow? (Referral)
I put together my liabilities. L, P, M, Prelims etc.
HS2 pay SCSJV our liabilities that are reported, minus applicable deductions, Plus Fee, into our project bank account. These deductions can be:
- queries, in month reasoning.
- when they believe something may be a Disallowed Cost, records.
Payment is then split equally between the parent companies on the JV.
I ensure liabilities are done before payments because liabilities are the cash in, which then enables the cash out to the supply chain (important to pay to comply with HGRCA).
CASH IN VS CASH OUT…
Talk me through a time you advised on cashflow?
F&R
Liabilities = Short-term cash flow (in month / EV)
EAC = Long-term cash flow (future / EAC)
- L3 Example - I monitored the progress of the works on site against the agreed programme. Performance on site was slower due to harder ground than anticipated, which affected our EV (forecast/budget spend vs actual spend), and therefore EAC. This advised increased future cashflow is required.
- L3 Example - brick egg sewer.
What can applicable deductions be?
- queries, in month reasoning.
- when they believe something may be a Disallowed Cost, records.
Give examples of costs of a project.
Labour
Plant
Materials
Staff wages
Preliminaries
What are preliminaries?
Preliminary costs related to a construction project can be diverse.
You can have people, plant, materials, but it is usually site establishment costs (e.g. site accommodations and welfare facilities) and site running costs (e.g. water, heating, electricity).
What did you learn from the GN on Cash Flow Forecasting, 1st edition?
GN on Cash Flow Forecasting, 1st edition states that there are 2 main types of cash flow forecasting: company & project.
- Materials on and off site.
o On site - QS should not allow payment to be made for materials that are brought onto site well in advance just to boost the Contractor/Subbies cash flow.
o Off site – QS to be mindful this can impact cash flow forecast, as some materials made off-site / pre-fabricated, e.g. bathroom pods, may be paid earlier than usual. - It also talks about the HGCRA 1996, aka The Construction Act and how it attempted to improve payment practices in the UK by improving cash flow & cash flow forecasting. E.g. requiring periodic payments & early communication of the amount that will be paid.
What techniques have you used to financially manage subcontractors?
Weekly progress meetings.
Quarterly review meetings.
What do you know about materials on and off site?
o On site - QS should not allow payment to be made for materials that are brought onto site well in advance just to boost the Contractor/Subbies cash flow.
o Off site – QS to be mindful this can impact cash flow forecast, as some materials made off-site / pre-fabricated, e.g. bathroom pods, may be paid earlier than usual.
What causes for monthly liability variances would you advise can be expected on your project?
Change / Variations.
Delays (site access).
Obstructions.
Weather conditions.
Resequencing of works.
Progressing on site quicker / slower.
Inaccurate forecasting in the first place.
How have you collected data for reports?
For F&R, I collect data from the site team. E.g. progress on site to date, and likely lookahead programme & forecast.
What is cost reporting? How do you go about producing a cost report / forecasting / reporting?
(Dai & Emil - will be asked)
Same Q as PF Q3
Cost Reporting is to inform the client of the likely outturn cost of the project. Also seniors / directors / parent company.
On a monthly basis, I carry out:
Liabilities - what we are liable to pay our supply chain. Liabilities are a build up of elements like L, P, M, Prelims. These go into the project cost report. This becomes Cost To Date. In the CVR/F&R meeting, I then advise my Seniors, Directors and the client of variances in forecast vs actual spend in the last period. Is performance on site slower (perhaps obstructions in the ground or harder ground), in which case this would affect our Earned Value (EV). EV is a metric that shows the value of the work completed, against the forecasted (budgeted) value of work. EAC would therefore increase.
Forecasts - speaking to the internal delivery team to establish a likely programme lookahead. They will consider methodology. I attribute costs made up of L, P, M, Prelims & Risk against activities on the programme. This shows a forecast spend per month, and a cost to complete, and then an overall EAC (the outturn cost of the project). Again, any variances, I have to advise the client in the F&R meeting with them.
My example L3 - for this is the Brick Egg Sewer HS2 originally said was not a CE. I advised it was because it wasn’t in the GBR or other Site Information. On our contract, the GBR has been added to Clause 60.1.
What is Cost value reconciliation (CVR)?
Cost value reconciliation (CVR) monitors and measures actual expenditure against budgeted project expenditure. CVR gives you a running account of the project’s profitability by comparing cost and value at given points in the project lifecycle. Relates to Earned Value (EV) analysis.
How have you advised profitability?
CVRs. EV.
How have you advised the client change movement?
HS2 Change Register, updated monthly, advising reasons for movement. For example, I advised the client of an increase to change due to the discovery of a brick egg sewer upon excavation which was not shown on the pre-existing site information or Geotechnical Baseline Report (GBR), advising this resulted in a CE. At first the client did not accept as a CE, but when I explained it was not in the Site Info or GBR, and that we had an amended 60.1 GBR clause, they finally accepted.
Quotation agreement fluctuations are also explained, for example, reduction in quotation value due to a reduction in the plant assessment.
