Commercial Management Flashcards
What is a the role of the commerical manager?
- maximise the potential of a business in terms of profitability.
- monitors, or controls,internal processes such as production, and manages external relationships with customers, clients and trading partners
- monitors financial performance (both forecast and achieved)
What are main areas of commercial management?
- Estimates, value engineering, supply chain management, valuing work, cash flow analysis
Provide commercial decisions that improved cost efficiency?
EVA, cost/value analysis, risk and contingency allowances, digital solutions, consider just-in-time delivery to avoid storages, consider leasing v purchases of equipment,
Provide mitigation against material price increases?
Paying upfront to avoid price fluctuations, looking for suppliers company-wide rather than per project
How are rates build up?
Labour, plant, materials and subcontractors, along with allowances for insurance, bonds, site overhead, risk and contractors’ profit
What are the five columns comprising a price?
Labour, plant, material, subcon, other
How is overhead typically calculated?
According to NRM1, OH are initially estimate by % against the works estimate. As the scope are getting defined, the prices are defined further.
The amount of company overhead recovery is generally determined by
expressing the budgeted annual overheads as a percentage of budgeted turnover and applied as a proportion of the cost of individual contracts.
What is cost/value reconciliation?
Comparing the internal valuation with the costs incurred
How would you prepare CVR? How do you ensure that it is up to date?
- I would determine the cumulative costs date, cutoff date may coincide with agreed accounting period
- I would check the fluctuationms all works in progress are accounted, risk items have been agreed
- I will determine the current profitability vs original budgeted values
Keep up to date - Forecast revenue on variations must be reported only when agreed.
- Reduced profit is expected if VO are paid on account
- Risk/contingency are retained
- Regular arrange meeting to conclude agreement on VOs to avoid backlogs
Are there any other techniques available?
Cost to complete exercise, EVA, Use of IT
What is the EVA?
Earned value analysis
How would you mitigate project that is behind programme?
- Review the current status of the programme
- Reviewing staffing/resource levels to gain efficiencies
- Discuss balancing of programme sequence as catch up plan
- Check possibility of accelaration against additional costs to be incurred
- Check for programme float to absorb delay
- Review cause of delay, to check EOT is applicable.
What is an accrual?
It is made within financial systems taking into account anticipated invoices that are not yet paid
Liability due to subcon vs amount paid to date
What process would you put in place when making contra charges?
- Supporting documents such photographs, invoices, etc.
- Records of any material replacement, attendances to assist subcon
- Issue early warning to subcon to allow rectification
- Agree with subcon before deductions
- Deal contra charges on payment certificate, pay less notices or final accounts separately
What is back to back exercise?
It is when similar contractual mechanism are applied to supply chain of the main contractor, to ensure cashflow and monitoring of works done throughout the project.
