14. Project Finance Level 3 Flashcards
On Cricklewood why was there an insufficient allowance made at tender stage?
What is a provisional sum?
A provisional sum is an allowance that is inserted into tender documents for a specific element of the works that is not yet defined in enough detail for tenderers to accurately price
What are the types of provisional sums?
What was your level of contingency?
Were the variations not agreed as part of the contract?
What is the contractor deemed to have allowed for?
What type of provisional sum was this for asbestos removal on Cricklewood?
On the P Programme scheme what did you advise your client on exactly on implementing variations?
You mentioned value engineering, why did you advise against it?
What is value engineering?
Value engineering is a systematic process of reviewing and optimizing the value of a project, product, or process to achieve the desired functionality, quality, and performance at the lowest possible cost without sacrificing essential functions or attributes
What is value management?
Value management is the process of agreeing what value means to a client and then putting in place procedures to achieve that value first time round.
How did you address the insufficient allowance for asbestos removal on the Cricklewood project during the tender stage?
Upon realizing the insufficient allowance for asbestos removal during the tender stage, I promptly advised the project manager of the situation.
I informed the project manager that variations would be necessary as the actual work differed from the provisional sum allocated for asbestos removal.
What steps did you take to ensure there was sufficient funding available for the instructed variations?
I implemented constant monitoring of the contingency pot to track available funds.
By regularly assessing the status of the contingency pot, I ensured that there was enough money available to fund the instructed variations.
Once I confirmed the availability of funds, I advised the project manager to utilize the contingency pot to fund the variations.
I issued the variation from contingency, informing the project manager of the changes in the new Purchase Order (PO) value and the reduction in the contingency pot, thereby ensuring transparency and alignment with project finances.
How did you assess the financial impact of implementing a variation in pipe specifications across 12 water sites?
I assessed the financial impact by conducting a thorough review of the pricing proposal for the change in pipe specifications.
This involved analyzing the original contract value, proposed changes, and estimating the additional costs associated with the new specifications across all 12 water sites.
I produced a detailed report outlining the financial implications, including the projected final value after incorporating the variations, and identified when the changes would need to be financed.
Why was value engineering not an option for funding these changes?
Value engineering was not considered as an option for funding these changes due to the specific and strict requirements of the project to meet outputs.
The project likely had specific performance or regulatory standards that needed to be upheld, leaving little room for modifications that could compromise quality or functionality.
Given these constraints, pursuing value engineering to reduce costs could have risked compromising the integrity or effectiveness of the project’s outcomes, making it an unsuitable option for funding the changes in pipe specifications.
