Commercial Management Flashcards
What is your understanding of the components that make the cost of the project to the contractor?
Staff, Labour, Materials, Plant, Professional Fees, Subcontract Labour, Subcontractors, Preliminaries and Overhead and Profit.
Why do you understand my the term working estimate?
Used to estimate and bid for a job (usually just referred to as an estimate). It is an estimate that includes costs and will be used during tender.
What are the key components of a CVR report in respect to cost/value to date?
Value earned to date, against costs incurred to date including liabilities and accruals.
What are the key components of a CVR report in respect to cost/value to complete?
Forecast of costs required to complete the project against forecasted estimated final value.
Explain the CVR process?
The CVR process is to establish the current and projected profit margin of the construction project. To establish this, I assess all costs incurred to date over the following cost heading; staff, preliminaries, labour, subs, plant and materials. I then calculate any accruals to finalise costs to date. I then update the expected final value of all these cost headings to produce a profit and loss statement for the project.
What do you understand by the term liability?
A liability is the total cost the contracting organisation must pay out to a vendor at a point in time.
How does this differ from cost?
Liability is the total cost due to be paid out, where as the cost is the total paid to date, the difference between the two is an accrual.
What would you consider before constructing a project cash flow forecast?
Before constructing a cash flow forecast I would consider the following:
1. Programme Start Date, Completion Date and Duration
2. Any advance payments
3. Cost to mobilise on site
4. Contractual provisions – materials on site, off site, how is work valued
5. Supply chain payments
6. Management costs
7. Variations
Why is the construction of a cash flow forecast so important?
- Allows organisations to pay expenses when they become due.
- Provides money to make investments, for example purchasing hire equipment.
- Security to lenders for credit.
- Provides contingency for unexpected issues.
- Enables a red flag system if extra credit is required to cover expenditure.
How is wastage calculated?
Wastage is allowed for as allocated contingency within construction budgets.
What insurances are required under a contract? How are they included in a tender?
- Public Liability Insurance
- Employer’s liability insurance
- Contractors All Risk Insurance
- Contractor’s Plant and Equipment Insurance
- Temporary buildings insurance
- Terrorism insurance
- Latent defect cover
What you understand by the term project budget?
How does this differ from the tender budget?
What current challenges is Covid and/or Brexit bringing to Commercial Management?
As a QS who has worked through COVID I have noticed a trend in Value Engineering becoming much more common during the tender and PCSA period as I do not believe PQS’s benchmarking data has been updated efficiently to reflect the cost increases we have seen and now labour cost increases due to labour shortages.
On your South Kensington Project, talk me through how you updated your CVR on a monthly basis?
To complete my monthly CVR’s I export from the company’s accounting software the latest cost report. From this I create a pivot table that sorts these costs into staff, labour, preliminaries, materials, plant hire, subcontractors, and subcontract labour. I ensure costs are up to date for that reporting month and accrue for any payments that are not showing on the cost report. I then input value against each subheading ensuring this is inline with the construction budget, which produces the profit and loss account for that project.
Talk me through how you carried out a cost to complete exercise?
To carry out the cost to completion exercise, I export from the company’s accounting software the latest cost report. From this I create a pivot table that sorts these costs into staff, labour, preliminaries, materials, plant hire, subcontractors, and subcontract labour. I ensure costs are up to date for that reporting month and then calculate the liabilities against each cost heading. I then forecast value against each subheading ensuring this is in line with the forecast final account, which produces the forecast profit and loss account for the project.
What did you include in your forecast for unagreed change?
For unagreed change I inputted the costs for the change and the estimated likely value I would receive from the CA. This would always be a commercial management decision that I would make and check with my director to ensure he is happy with the management of that risk.
Talk me through how you prepared the cash flow forecast?
To prepare the internal cashflow forecast, I calculate the likely monthly spend for each cost heading. This is calculated by fixed costs which I know will be paid to staff, subcontractors, and estimated costs on labour, materials, plant hire and preliminaries. This is split per month which allows me to input this into a cashflow with shows the likely spend during each month.
What document(s) other than the CTC did you need in order to do this?
To complete this I utilised cost report data from accounts, subcontractor liabilities and payment schedule, the construction budget, and construction programme.
What did you identify as the cause of the labour overspend?
I identified the cause of the labour overspend to be the site manager retaining labour on site due to variations that had occurred.
