2. Commercial Management Level 2 Flashcards
You mentioned the use of CVR on the Horton in Ribblesdale project. Can you explain what a CVR is and how you used it to aid your project?
In that case what is an EVA and how did you use that on Horton in Ribblesdale?
The example of planned value on this was around design of the 200k i mentioned.
Programme started in October and finished in April. In January the planned cumulative cost was £199k.
Actual cost was 132k
Earned value was £174k
This allowed me to calculate cost perforamcne indicator of 1.32.
I Followed the same procedure for other elements like enabling works, site setup and advised my client the project is on track to be delivered under budget.
I of course monitored this closely.
Can you tell me how you would go about carrying out a CVR?
What did you do with the efficiency on the Horton project?
What is earned value analysis?
How would you calculate planned value (PV)?
How would you calculate actual cost (AC)?
How would you calculate Earned Value (EV)
What is cost performance index?
For CPI, we divide earned value by the actual cost. If its 1 we are right on track.
Below 1 we are over budget
Over 1 we are under budget
What is schedule performance index?
For schedule performance index earned value/planned value
1 = on track
Below 1 - behind schedule
Above 1 - on track
On the Horton in Ribblesdale project, you carried out an earned value analysis and identified efficiencies on labour and a slight reduction in plant. Can you elaborate on how you broke down the initial budget figure into components and used this information to compare each cost to the budgeted figure on a cumulative basis?
To conduct the earned value analysis, I initially broke down the initial budget figure of £2.2m into distinct components such as overheads, plant, and labor.
This breakdown allowed me to establish the Planned Value (PV) for each component, representing the budgeted cost of work scheduled to be completed.
Using this information, I plotted the Planned Value (PV) on a cumulative basis to visualize the planned expenditure over time.
As the project progressed, I tracked the Actual Cost (AC) incurred by the project delivery team and compared it to the Planned Value (PV) for each component on a cumulative basis.
Additionally, I assessed the Earned Value (EV), representing the value of work actually performed, using the figures updated by the project delivery team as the project progressed.
By comparing the Actual Cost (AC) and Earned Value (EV) to the Planned Value (PV) for each component, I could identify areas of efficiency, particularly in labor and a slight reduction in plant costs.
How did this analysis help you conclude that the project is not behind on programme and is within budget?
The earned value analysis allowed me to assess the project’s Cost Performance Index (CPI) and Schedule Performance Index (SPI) alongside identifying efficiencies in labor and plant costs.
The Cost Performance Index (CPI) compares the value of work performed (EV) to the actual cost (AC), indicating cost efficiency. A CPI greater than 1 indicates cost efficiency, while a SPI greater than 1 indicates schedule efficiency.
By comparing the CPI and SPI to 1, I determined whether the project was meeting, ahead of, or behind schedule and budget targets.
The analysis showed that the CPI was greater than 1, indicating cost efficiency, and the SPI was close to 1, suggesting schedule adherence.
Thus, considering the efficiencies identified and the performance indices, I concluded that the project was not behind schedule and was within budgetary constraints.
For the Mercury House project, can you explain how you created a resourcing profile and used it to work out the project management cost?
I created a resourcing profile by establishing the time commitment of each team member, including roles such as the commercial manager and project manager, dedicated to the Mercury House project and combining this with a programme provided by a project planner.
Using this information, I calculated the project management cost by multiplying the time committed by each team member by their respective hourly or daily rates.
This allowed me to allocate project management costs accurately across the project timeline, ensuring sufficient resources and budget allocation for management activities throughout the project and create a sufficient budget as part of the project which was the monitored on a weekly basis by running expenditure reports.
How did you integrate the quotes provided by contractors into the cost forecast and adjust it based on the progress on site?
I integrated the quotes provided by contractors into the cost forecast by aligning them with the timeline of when their work was scheduled to be completed. By in-depth review of their cost forecasts and reviewing it with the delivery team I was able to ensure their accuracy.
Each contractor’s quote was allocated to the corresponding time periods within the project timeline, reflecting the anticipated costs associated with their services.
As the project progressed, I adjusted the cost forecast based on the actual progress on site, comparing it with the scheduled timeline and reported the revised cost of work done to my client.
Any deviations from the planned progress were reflected in the cost forecast adjustments, ensuring that the forecast remained accurate and aligned with the project’s actual status and I presented this on a monthly basis.
For the Mercury House project, you were responsible for preparing and adjusting the cost forecast. Describe the process and how you ensured its accuracy over the project lifecycle
I prepared the initial cost forecast by integrating the resourcing profile, project management costs, and contractor quotes into a comprehensive financial projection.
On a monthly basis I requested that contractors send me updated cost forecasts, use of early warnings for any delay and progress reports to understand how the scheme is moving forward.
I regularly reviewed and adjusted the cost forecast based on actual progress on site, comparing it with the planned timeline and budget.
Any variances between the forecasted and actual costs were analysed, and adjustments were made accordingly to ensure accuracy.
I maintained open communication with project stakeholders, including contractors and project managers, to gather updated information and validate the forecast adjustments.
By continuously monitoring progress and costs, I ensured that the cost forecast remained accurate and reflective of the project’s financial status throughout its lifecycle.
