Commercial Management Flashcards
What are the differences between direct and indirect costs?
- Direct Costs: are the costs to complete the work e.g. labour, plant and materials
- Indirect Costs: are the costs to support the project
What is a CVR
A cost value reconciliation is used to measure the projects ingoing and outgoing costs against the budget
How do you prepare a CVR?
- My CVR automatically updates to include all ledger costs to a specified date within the business reporting calendar
- I would then input all accruals in the month and ensure the total cost to date reflects the cost plan
- I would input the latest client certification
- Finally I would input the cost phasing, which will be used to work out the expected final cost and revenue of the project
How to you establish you CVR is accurate and up to date?
- Forecast revenue is only reported when variations are implemented
- A reduced revenue is taken on CE’s that aren’t implemented
- I have regular meetings to ensure all risk items are covered
What is an accrual
An accrual is the cost for work that has not been paid
What is WIP?
- WIP is used to work out the percentage of work complete against the percentage of work paid
- Used to establish if the project is likely to run over budget
What is a risk register?
A risk register summarises potential risks that are specific to a project
It contains:
- Name and description of a risk item
- Likelihood of a risk occurring
- The potential cost of the risk
- The classification of either low, medium or high
- The risk owner
How is WIP calculated
- Actual cost / estimated final cost = percentage of work complete
- Percentage complete * billed revenue = earned revenue
- Billed revenue - cost to date - earned revenue = over/under billing
What is an Employer risk on your project?
- Loss or damage to the works, plant and equipment caused by war, civil war
- Strikes, riots and industrial action
What is an example of a commercial decision you have made to improve cost efficiency?
I have undertaken a cost comparison on hired equipment vs purchased equipment to understand if the project could benefit from a cost saving
What advise would you give to a client to help reduce project cost?
- I would advise on using alternative materials that still meet the specification (value engineering)
- I would carry out a reconciliation on plant and equipment to understand if there are items on hire that aren’t being used / aren’t required
What is the difference between value management and value engineering?
- Value management outlines the different approaches to the relationship between project objectives and business needs
- Value engineering summarises the different approaches to achieving the required functionality for a particular material or system
What advise would you give to the client for managing risk?
- I would understand the clients objectives and expectations for the project
- I would then identify the project risks and communicate these with the client
- I would advise on the different risks associated with each procurement route
How do you manage cash flow issues?
- I always undertake checks to understand the cumulative cost to date against the certification value
- I arrange meetings with the client to understand variances and whether further substantiation is required to allow payment on certain items
- If there is a growing variance I escalate to my commercial director
How is value managed on your project?
- Value is managed on my project by workshops which are used to motivate the team, promote innovation and maximise the overall performance of the project team
