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QS APC > Commercial Management > Flashcards

Commercial Management Flashcards

1
Q

How would you manage project costs?

A
  • Cashflow forecasting
  • Operate change control process
  • Regular cost reporting and CVR
  • Manage provisional sums
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2
Q

What is Cost Value Reconciliation?

A

A CVR is carried out in order to measure expenditures against budgets and to track value received

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3
Q

How would you check the financial due diligence of a contractor?

A

Credit Checks
Check on Companies House

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4
Q

How can you protect yourself against insolvency from Sub-contractors?

A
  • PCG
  • Performance bond
  • credit check
  • Obtain references
  • review accounts prior to signing
  • Supply chain collateral warranties
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5
Q

How can costs be controlled proactively?

A
  • change control procedures
  • attending site
  • Risk management meetings
    Ensure payment processes
    Retention
    Cashflow forecast
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6
Q

What is a PO?

A

A Purchase order - A commercial document from a buyer to a seller.

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7
Q

What is a capital allowance?

A

Allowing a company to get tax relief on tangible capital expenditures by allowing it to be expended against annual pre tax income

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8
Q

What is Capital expenditure?

A

CAPEX - Funds uses by a business to acquire physical assets such as property or equipment

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9
Q

What is Operational expenditure?

A

OPEX - Expenditure in relation to performing normal business operations

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10
Q

What is the difference between capital and revenue?

A

Capital forms part of balance sheet and revenue forms part of P&L accounts

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11
Q

Can you name some examples of Equipment, Plant, and Prelims ?

A

Equipment - Time related costs i.e. Excavators, cabins, dumpers, small tools, cherry pickers
Plant - Purchased plant and materials under NEC - Pumps for seed sludge
Preliminaries - Costs associated with programme - staff, labour, plant.

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12
Q

What is the NEC Schedule of Cost Components?

A

2 types Shorter Schedule of cost components used to assess CE’s under Option A and B.

Schedule of Cost components used to assess CE’s under C,D,E and used to categorise costs for the Price for Work Done to Date.

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13
Q

Can you name the titles in the Schedule of Cost Components ?

A

People, Equipment, Plant and materials, manufacture and fabrication, design, charges, insurances

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14
Q

Can you tell me what the difference is between cost and cash?

A

A cost is a liability that will fall due for payment. Cash is what is in the bank once all your liabilities have been paid.

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15
Q

What is Earned Value Analysis?

A

Method for assessing the work complete against the plan and technique used to forecast final value and cost.

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16
Q

How do you forecast cost?

A

Cost is forecasted based off the programme, our project programme for labour, plant, materials, staff etc. and subcontractor cost programme.

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17
Q

What may influence forecasted costs?

A

Market conditions, un let subcontract packages, provisional sums, risk occurrence, weather.

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18
Q

When should application and relevant payment notices be issued?

A
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19
Q

What is the difference between Value management and Value engineering?

A

Value management is a method of highlighting opportunities to create value through the entire life cycle of a project, from inception to completion and beyond.
Value engineering is predominately the professes of increasing value while reducing costs through improved design, enhanced function, reducing risk, reducing cost, reducing whole life costing

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20
Q

Can you tell me what a cost value reconciliation is?

A

It’s a procedure to show profit and loss of a project; usually done month end for contract review where the value of works up to month endless what our costs are will show our profit and loss.

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21
Q

Can you tell me some cash management techniques?

A

Prompt payment from client, payment for materials off site, advance payment, pay subcontract liabilities as late as possible but still within the contractual timeframe.

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22
Q

How is a budget maintained?

A

Continuously monitored during a project and ensure that procurement targets are being met.

23
Q

What are some Cost mitigation strategies?

A

Delivery - Change from subcontractor to direct delivery. Review material specifications and explore cheaper alternatives.

Financial Strategy - considering paying for materials un fixed plant etc up front to avoid price fluctuations.

Procurement - Re tender of subcontract packages use supplier company wide opposed to project specific.

Resource - Carry out review of programme to enhance efficiency, Carry out review of staff, labour and plant to increase efficiency,

Utilities cost benefit analysis - permanent over temporary power cost benefit analysis.

24
Q

How would you Recover cash flow showing deficit?

A

First identify why the deficit has occurred. Then look at payment for offsite materials, advance payments, Delay procurement of expensive items, re negotiate payment terms.

25
Q

What did a Pay-Less notice used to be called?

A
  • A withholding notice
26
Q

Can you tell me about the Housing Grants, Construction and Re-Generation Act?`

A
  • is intended to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly.
  • It includes the right to adjudication, right to suspend performance, etc.
27
Q

What is the government payment charter?

A
  • Sets out fair payment commitments for organisations in the construction industry to sign up and agree to.
  • All large contractors should follow the Construction Supply Chain Payment Charter. Now called the ‘Payment Reporting Regulations’ – changed in Jan 22.
  • This sets out fair payment commitments for companies and LLP’s
  • Public authorities are already required to pay within 30 calendar days. On central Government contracts, payment will be made to:
  • Tier 1 within 14 days,
  • Tier 2 within 19 days
  • Tier 3 within 23 days of the due date, which will be 7 days after the common assessment or valuation date established by the client in the Tier 1 contract.
28
Q

Can you tell me about the Scheme for Construction Contracts?

A

is a scheme which applies when construction contracts do not comply with the Housing Grants, Construction and Regeneration Act.

29
Q

What are the components that make up the cost of a project to a contractor?

A
  • Profits and overhead – staff, labour, materials, access equipment, prelims
30
Q

How often do you report cost?

A
  • Monthly however, we continually update the CVR when changes arise.
31
Q

What is a cash flow forecast?

A
  • A cash flow shows how much money the business or project expects to receive and pay out over a set period.
32
Q

How do you use a cash flow?

A
  • I use a cash flow by understanding what we’ve been certified from the client, how much money we have in the bank and then review what our sub-contractors have applied for and what else is to be paid (plant, material & labour etc). This helps me to understand what accruals I need to make
33
Q

How do you manage risk and contingency?

A
  • I manage risk by keeping a risk register and keeping this as a working document.
  • Consistently having meetings with the engineers to understand the risks around and the contingency which has been allocated or removed.
34
Q

What is CVR?

A
  • Cost Value Reconciliation
  • Is the profit and loss statement for a project.
  • Helps calculate the amount of work done to date and the cost incurred to date.
  • It is the difference being the amount of profit or loss made at that point in time.
35
Q

How can you calculate works completed to date?

A
  • Visit site, carry out assessment and see what’s been done in line with what’s being claimed within a period
36
Q

How do you know what costs you’ve incurred to date?

A
  • By looking at what we’ve been charged for by a subcontractor or a supplier
  • What we’ve paid out for in terms of material
37
Q

What is the purpose of change control?

A
  • Change control has three purposes:
    1. All relevant parties are consulted
    2. Enables change to be assessed in terms of time, quality and cost.
    3. A record is formed to note any change.
38
Q

What is EVA (Earned Value Analysis?)

A
  • Is a method of measuring the projects progress at any given time.
  • Forecasting it’s completion date and final cost
  • Analyses the variance in the schedule and budget as the project proceeds
  • Compares planned to work to that actually completed.
  • Helps determine if works are progressing in line with programme.
39
Q

How do you prepare a cost value reconciliation?

A
  • I would firstly confirm the contract value/total which would be my starting point.
  • I would look at the instructions in the period and update these and include these on my CVR
  • I would then look at the Sub-contractor’s application and see if there are any changes or claims in the period from them.
  • I would regularly update this document as soon as anything would arise.
  • This would help me understand the work completed to date and ensure that we are on budget.
  • This would give me a rolling ‘cost to complete’ on each package.
40
Q

How do you prepare a cash flow forecast?

A
  • Firstly, understand the work we’ve completed in the period and applied to the client for to understand what money is due.
  • We would then understand what we need to pay out for cost, material, plant etc.
  • We would also need to make allowances for testing, commissioning and variations to the contract.
41
Q

The client wants to make a change, how do you manage this?

A
  • Implement the change control procedure.
42
Q

How do you undertake the change control process?

A
  • In my role, we would receive the PMI or change from the client.
  • We would assess the change and upload this onto a change register
  • I would then discuss the change with the relevant parties within CHt and we would then go to the Client if we needed further information.
  • I would then start to pull together a quotation in line with the client’s requirements, clearly outlining our fees.
  • I would then arrange a meeting to discuss this with the client with a view of gaining implementation.
  • I would then review my documentation and close this out on the schedule with the cost clearly indicated.
43
Q

Are you aware of any other change control procedures?

A

PIMMC:
1. Propose Change
2. Impact Summary
3. Make decision
4. Make the change
5. Close out change

43
Q

Are you aware of any other change control procedures?

A

PIMMC:
1. Propose Change
2. Impact Summary
3. Make decision
4. Make the change
5. Close out change

44
Q

What else can a cash flow be used for?

A
  • To monitor progress and performance on site
  • Forecast for the wider business I.e whether you have the capacity to take on more work
  • To see how the business is performing and isn’t in the red.
45
Q

How did you deal with the potential movement of the PC date upstream?

A
  • We firstly needed to clearly understand why the PC date had moved.
  • It was clear that there was a lot of client change.
  • I had a meeting with the Planner and Engineers who assessed each additional PMI/CE and we allocated additional time to this which gave a clearer indication of the programme and the potential new completion date.
  • I then needed to advise the client of this so that we could get a contractually agreed EOT and get this implemented.
46
Q

How did you ensure productivity was not reduced from the acceleration i.e working longer hours?

A
  • Everyday there was a clear plan of works and what needed to be done and dates completion was required by; which was mutually agreed with the Sub-Contractor.
  • We always agreed to pay for 2 extra hours but if the Sub-Contractor completed the tasks in a shorter period of time, we would pay the 2 hours as a bonus.
47
Q

What is meant by profitability?

A
  • The production of timely, transparent CVR data is a highly valuable asset for the senior management responsible for the profitability of contracts.
  • The interim application or application to the client can be used to forecast the final cost, final account and ongoing profitability of the contract, as well as to determine what profit can be declared in the contracting organisation’s management accounts.
48
Q

What is meant by competitiveness?

A
  • We need to ensure that above everything else, we must make a profit. Therefore, this absolutely needs to come into consideration when tendering for a job.
49
Q

What is cost flow?

A

Cash flow, provides a pictorial representation of income over time.

50
Q

If you were to miss PC, what would have been the impact?

A
  • On Brighton it would have been LD’s as this is recorded within the contract and this would be the usual stance for the JCT.

Although the costs are nil on the LD’s - we would still have our own prelim costs, plant over run costs, sub-contractor EOT’s etc.

51
Q

How do you know what costs you’ve incurred to date?

A

By running a report on coins which will give us actual costs incurred to date for labour, plant, material, sub-contractors etc.

52
Q

What is the purpose of change control?

A
  • Change control has three purposes:
    1. All relevant parties are consulted
    2. Enables change to be assessed in terms of time, quality and cost.
    3. A record is formed to note any change.
53
Q

What is EVA (Earned Value Analysis?)

A
  • Is a method of measuring the projects progress at any given time.
  • Forecasting it’s completion date and final cost
  • Analyses the variance in the schedule and budget as the project proceeds
  • Compares planned to work to that actually completed.
  • Helps determine if works are progressing in line with programme.

QS APC (23 decks)

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