Commercial Management

Question 1

What are Prelims?

Answer 1

‘The cost of administering a project and providing plant, site staff, facilities and site-based services and other items not included in the rates’

Question 2

What is a Bill of Quantities?

Answer 2

Document prepared by QS that provides project specific measured quantities of items of work identified by drawings and specs in the tender documentation

Question 3

When would you use either a CSA or BoQ?

Answer 3

• Contract sum analysis prepared by contractor as part of tender on DB projects
• Breaks down price into a form allowing client to compare it with other tenders

Question 4

What are OH&Ps?

Answer 4

• Profits – how much money contractor makes, TR-TC
• Overheads – calculated proportionately based on contractor undertaking works – head office costs, property costs, loan costs, insurances, taxes, marketing and tendering activities
• Site overheads (site accommodation, insurance) are not OH&Ps but are prelims

Question 5

What are Provisional Sums?

Answer 5

• Provisional sum is an allowance/best guess inserted into tender costs for element of works not yet defined in enough detail for tenderers to accurately price
• Defined provisional sums – described in sufficient detail that contractor is expected to have made allowance for them in their programming, planning and pricing prelims
• Undefined provisional sums – less well-described and contractor is not expected to make allowance for them (so client’s risk)

Question 6

What is Value Engineering?

Answer 6

Activity to improve value at same cost or maintain value at lower cost without affecting brief, a systematic method to improve the value of a good or service by using an examination of function, borne in WW2
Value is the ration of function to cost: improve it by increasing function or reducing cost

Question 7

What is Value Management?

Answer 7

Broader process to explore how value could be provided at strategic level by helping to develop right project brief, borne in 1980s/1990s

Question 8

What information do you need to compile a cash flow?

Answer 8

• Programme
• Contract value
• Sub-packages

Question 9

What would you find on a cost plan?

Answer 9

Foundations, cladding, fit out, MEP, bespoke items, landscaping, public realm, exclusions, assumptions, VE

Question 10

Make up of a final account

Answer 10

• 1. Summary
• 2. Contract sum
• 3. Adjustments of prime sums
• 4. Adjustment of provisional sums
• 5. Adjustment of approx. quantities
• 6. Variations
• 7. Claims
• 8. Fluctuations

Question 11

Explain a value management process

Answer 11

• Issues analysis – what are the project issues
• Function analysis – what is the project mission and function
• Project value system – project success factors
• Options and initial options appraisal – generating options to satisfy the project mission
• Typically established through workshop(s)