Commercial Management - Level 1 Flashcards
What is your understanding of the components that make the cost of the project to a contractor?
o Preliminaries
o Site overheads
o Provisional items
o Contingency
o Fixed price/inflation
o Risk and opportunity
o Corporate overhead
o Profit
What do you understand by the term working estimate?
An approximation of the cost of a construction project or operation.
What are the key components of a CVR report in respect to cost/value to date?
The key components of a CVR in respect to cost/value to date are the amount of cost incurred to date, which is compared with the amount of work done to date, where the two compared demonstrate the profit and loss to date.
What are the key components of a CVR report in respect to cost/value to complete?
The key components of a CVR in respect to cost/value to complete are the amount of cost incurred which is forecast to the project completion, which is compared with the amount of work which is forecast to the project completion, where the two compared demonstrate the profit and loss at project completion.
Explain the CVR process.
o Comparison of the overall cumulative project cost versus the overall cumulative project value
o Review of the period movement for value and cost: a high-level check that there is not an unexpected swing in either
o Comparison by common analysis levels (work breakdown structure, element or activity), reflecting the levels at which the estimate and project forecast were produced
o Comparison of cost elements
o Identification of variances in cost and value against each element or activity
o Once the basic reconciliation result is arrived at, the consideration of risk, contingency and other director’s adjustments can be made.
What you understand by the term liability?
The total liability can be defined as the total cumulative amount that would be due to that subcontractor for that package of work up to the period end-date, if no further work was to take place either on or off-site.
How does this differ from cost?
It differs from costs in the sense that it is money that is yet to be paid to the subcontractor, where cost is what has already been paid to the subcontractor.
What would you consider before constructing a project cash flow forecast?
- Advance payment
- Mobilisation: how much cash will be needed to mobilise the project or contract? The following must be considered
- Contractual provisions
- Supply chain
- Programme
- Credit
- Variations
Why is the construction of a cash flow forecast so important?
They are used to manage income and expenditure, to ensure that there are enough liquid funds in the business to keep it running. It provides a forecast ‘early warning’ of any future point in time when there may not be sufficient liquid funds, informing management in good time, to enable mitigation strategies to be put in place and decisions to be made, such as arranging alternative funding.
How is wastage calculated?
Dividing the amount of each basic element determined for each project, measured in original measure units, by the built up area, thus correcting the negative effect of the size of the work and enabling comparisons.
What insurances are required under a contract? How are they included in a tender?
- Public Liability Insurance - designed to offer protection to individuals, businesses and non-commercial organisations against claims for injury or damage, for which they are found legally liable.
- Professional Indemnity Insurance – provides financial cover in the event a client suffers financial loss as a result of a breach of professional duty, e.g. neglect, errors or omissions.
- Employer’s Liability Insurance - covers the costs of employee claims for illness or injury caused by their work due to employers’ negligence.
- Contractors All Risk (CAR) Insurance - provides protection for individual construction contracts.
What you understand by the term project budget?
This is a detailed estimate that is usually produced at the initial stages of a project, prior to construction.
How does this differ from the tender budget?
An evolution of the estimate, updated to reflect information not available when the estimate was first produced; an estimated plan of the cost to complete the project following the contract award, based on actual costs incurred, plus the project team’s planned procurement and delivery methods. The budget should be continually updated until project completion.
What do you understand by the term working estimate?
The cost of labour and materials have increased as a result of Brexit as it has caused a reduction in labour and increased administration for the movement of personnel and materials.
Covid-19 has increased the likelihood of colleagues working from home which has influenced collaboration in the industry.
