Commercial Management (of Construction Works)

Question 1

What is your understanding of the components that make the cost of the project to a contractor?

Answer 1

Under the NEC contract, the Schedule of Cost Components lists out all of the costs in which the contractor will be paid for on the project. This includes People, Equipment, Plant, Materials, Subcontractors etc.

Question 2

What are the key components of a CVR report in respect to cost/value to date?

Answer 2

Analysis of the cost to date vs forecast in previous months across the various headers listed in the Schedule of Cost Components.

Question 3

What are the key components of a CVR report in respect to cost/value to complete?

Answer 3

Aligning the latest programme to the forecast to complete in the CVR report ensures its updated with the latest and most accurate data. Ensuring that each of the activities are picked up and allowances have accurate figures against them. It is also important to ensure the risk register is up to date with costs attributable.

Question 4

What do you understand by the term liability? & how does it differ from cost?

Answer 4

Liabilities are the debts a business owes and expenses are the costs a business incurs to generate revenue.

Question 5

What would you consider before constructing a cashflow forecast?

Answer 5

Consider the income and outgoings during your cashflow forecast period and sum the running cashflow amount.

Question 6

How is wasteage calculated?

Answer 6

Concrete wastage (%) = [(Volume of concrete actually used - Volume of concrete as per design) / Volume of concrete as per design] x 100

Question 7

What insurances are required under a contract? How are they included in a tender?

Answer 7

Professional indemnity
Contractors all risk
Employers’ liability
Public liability
Products liability

When sending out tender enquiries, the above insurances are listed in section 8 of Contract Data Part One

Question 8

What current challenges is covid and/or Brexit brining to Commercial Management

Answer 8

Suppliers are struggling with increased costs, labour and supply shortages following departure from the EU.
COVID challenges have minimised since the rapid decrease in cases, however at the time it caused increases in time and cost due to the restrictions put in place.

Question 9

Can you explain how you compile the cashflow forecast for subcontractors

Answer 9

Table out the forecasted costs for the project in line with each of the cost components and mark that as ‘outgoings’. For the income, table out the predicted payments we are to receive from the client. This generates the running cashflow amount.

Question 10

How do you populate the risk and opportunity register?

Answer 10

Each month myself, the contractors PM and the risk coordinator will review the risk register addressing if a risk or opportunity has passed or present. An impact, mitigation and scoring is applied to each risk which also contributes to the value of the risk or opportunity.

Question 10

How do you deal with anticipated variations, those that haven’t reached a CE status or are disputed as a CE by the PM?

Answer 10

If a CE has been notified and it is disputed by the PM, I will request their position on the matter and respond accordingly. If a meeting is required, then I will call a meeting with the relevant members required to resolve the situation.

Question 11

Can you explain more about how you incorporate the latest programme into the CVR?

Answer 11

Within the CVR document is a formulated programme tab which you can insert an excel version of the Clause 32 which becomes usable data. The cost component tabs can be linked by activity ID reference which attributes a start and finish date to a cost.

Question 12

Can you provide an example of value engineering you have undertaken on your projects?

Answer 12

I carried out a value engineering exercise on the ducting contained within an existing subcontract package. After review of the drawings, I proposed a simpler duct run which discounted various manholes.

Question 13

What do you do with the cost data generated by your projects? Is it kept centrally for future use?

Answer 13

Yes, the cost data is filed centrally for the different departments to access. For example, the estimating department can reconcile live costs for materials, subcontract packages, labour rates etc for use on future bids.

Question 14

What other methods of compiling a cashflow forecast have you used?

Answer 14

I have carried out weekly cashflow forecasts for subcontractor payments only whereby I create a list of all subcontractors and our liabilities with them and compare it to the dates we are to be paid from the client where we have applied for said payments.

Question 15

On Forton, how did the 4-month delay happen, was it a domestic issue or did the client have any culpability?

Answer 15

The four month delay/ extension was due to a number of factors:
o Weather delays
o Slow production and inefficient labour
o Poor forecasting from the site manager

Question 16

What were the financial implications of the labour and plant increase on Forton and what impact did your intervention have?

Answer 16

The financial implications resulted in a circa £200k increase to labour and plant. This reduced our risk allowance considerably and had a negative effect on the pain and margin. My intervention to draft a detailed programme and track on a weekly basis held the site team accountable and gave clearer direction as to what work is required to be complete day by day. It resulted in no further increases.

Question 17

What lessons did you learn from this and how differently would you advise your senior management in the future?

Answer 17

Begin to plan earlier with the site team.
Have them bought into a programme that’s been agreed.
With knowing the details earlier, I would advise senior management that there is an exercise to be carried out which will result in an increase. By doing this earlier, it negates the larger impact of the shock and allows the project team to plan accordingly.

Question 18

Can you provide another project example where you have advised at a senior role regarding project cashflows?

Answer 18

Cashflow become an issue across the framework, as suggested by senior management. I advised that it will be a good idea to have each project’s QS table out the cash that their project is due to pay over the forthcoming weeks. This was implemented on a weekly basis and allowed the finance team to understand how much cash we required.

Question 19

Can you outline what’s included in the Commercial Management of Construction RICS Guidance Note?

Answer 19

1. Value Engineering
2. What is a commercial manager (managing relationships and maximising business profitability)
3. Cost and cashflow analysis