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KF APC Revision > Level 2 - Commercial management of Construction > Flashcards

Level 2 - Commercial management of Construction Flashcards

1
Q

N1. What is a Cost Plan?

A

• Cost planning is producing an estimate based of historic data, such as data from BCIS. It gets constantly updated with real time prices over the lifetime of a project to give a comprehensive price breakdown.

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2
Q

N2. Who prepares a cost plan?

A

• The Cost Consultants.

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3
Q

N3. What types of cost plan are there?

A
  • Elemental Cost Plan.
  • Initial Cost appraisal.
  • Approximate quantities cost plan.
  • Pre-tender estimate.
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4
Q

N4. What is an initial cost plan?

A

• A pre-estimate of the various cost options available at feasibility stage.

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5
Q

N5. What is a feasibility study?

A

• Preliminary studies undertaken in the early stages of a project, analysing whether a project is viable, and what options there are relating to construction methods etc.

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6
Q

N6. What is an Elemental Cost plan?

A

• A cost estimate prepared at the project brief, which is developed throughout the detailed design.

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7
Q

N7. How does an Elemental Cost Plan evolve?

A

• Initially each item is a percentage of the overall figure, or budget. This gets more detailed as the design develops, through measuring drawings, using sub-contactor prices etc.

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8
Q

N8. What is an approximate quantities cost plan?

A

• A cost estimate carried out at detailed design stage, based of approximate quantities.

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9
Q

N9. What is a pre-tender estimate?

A

• Prepared alongside the tender documents, they are an estimate of the total build cost at tender stage.

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10
Q

N10. What is the Contract Sum?

A

• The agreed value for carrying out the works in accordance with the contract.

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11
Q

N11. What is a Contract Sum Analysis?

A

• A pricing document, typically used in Design and Build Projects, which breakdowns the cost of a project.

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12
Q

N12. What is an Estimate?

A

• The likely cost of something based of the limited information provided at the time.

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13
Q

N13. What can you use to value a estimate?

A
  • Use Build Construction Information Service, value a building on a price per square foot.
  • Can use historical data, i.e. for care homes we work on, we can provide budget prices based on a price per bed etc.
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14
Q

N14. What is a tender letter?

A

• A letter completed by the contractor, and is submitted along with the tender outlining their tender proposals.

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15
Q

N15. What is included within a tender letter?

A
  • Cover letter.
  • Executive summary.
  • Assumptions.
  • Exclusions
  • Cash Flow Forecasts
  • Risk Register
  • Value Engineering Proposal.
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16
Q

N16. What information would you require to potentially establish a budget?

A
  • Size or number of beds etc.

* Location

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17
Q

N17. What is a Cash Flow Forecast?

A

• A prediction of the incomings and outgoings of cash with in a business/project.

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18
Q

N18. What are the two types of Cash Flow Forecast?

A
  • Organisational Cash Flow.

* Project Cash Flow.

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19
Q

N19. What is Organisational Cash Flow?

A
  • Used for planning and analysing company health.

* It is used to predict the incomings and outgoings of cash within a business over a specific period.

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20
Q

N20. What is Project Cash Flow?

A
  • Used for determining he amounts of cash that will be paid to a contractor, and the time they will be paid.
  • Can be used to monitor performance by comparing value of interim valuations against cash flow forecasts.
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21
Q

N21. What are the different payment/valuation methods?

A
  • Stage Payments
  • Milestone Payment
  • Payment from an activity schedule
  • Third party certification.
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22
Q

N22. List in order which offers the most certainty in terms of value and time it will be paid.

A
  1. Stage payments.
  2. Milestone payments.
  3. Payment from an Activity Schedule.
  4. Third Party Certification.
23
Q

N23. List in order which offers the most accuracy in terms of the value of works completed on site for valuations.

A
  1. Third Party Certification.
  2. Payment from an Activity Schedule.
  3. Milestone payments.
  4. Stage Payments.
24
Q

N24. What is are Stage Payments?

A
  • Pre-determined values that will be paid on a specified date.
  • They do not offer much in terms of value accuracy, as they might not reflect the value of works completed on site.
25
Q

N25. What are Milestone Payments?

A

• Pre-determined values against specific items, which are broken down into smaller stages.
o I.e. footings 25%, 50% 75% and 100%.
• They are fairly accurate in terms of value completed on site.

26
Q

N26. What are Payments against an Activity Schedule?

A

• Payments which are made against the completion of a pre-determined activity, i.e. completion of the footings.

27
Q

N27. What is Third Party Certification?

A

• Were the works completed to a specific date are measured, valued and certified for payment by a third party, i.e. a PQS.

28
Q

N28. What other methods of Cash Flow Forecast do you know?

A

• The ‘S’ Curve Method.

29
Q

N29. What is the ‘S’ Curve method?

A

• A general principle, that a typical construction will follow:
o Low initial start costs.
o High costs in the middle as the majority of the works is undertaken.
o Low finish costs from demobilisation etc.

30
Q

N30. What should you consider when producing a cash flow forecast?

A
  • Who the forecast is for, Client, Contractor, Company, Whole project cashflow.
  • If for the client for a specific project, what you are projecting to, i.e. Due date, final date for payment, Cumulative.
31
Q

N31. What would you do if you received a valuation from a Contractor that was massively over the Cash Flow Forecast value?

A
  • Check contractors progress on site, to see if they are ahead of programme.
  • See if they have re-sequenced the works.
  • It may mean that the contractor is in distress.
  • It might mean that the Cash Flow Forecast is incorrect.
32
Q

N32. What would you do if you received a valuation from a Contractor that was massively less than the Cash Flow Forecast Value?

A
  • Check progress on site, they might have re-sequenced the works.
  • Might mean that the contractor is behind programme.
  • It might mean that the Cash Flow Forecast is incorrect.
33
Q

N33. How do you report progress against budget?

A
  • Cost Value Reconciliations.

* Works Breakdown Structure.

34
Q

N34. What is a Works Breakdown Structure?

A
  • It organises the project into manageable sections, comparing budget against the actual value of the works in a hierarchy structure.
  • From this you are able to analyse each aspect of a project for its profitability.
35
Q

N35. What is a Cost Value Reconciliation?

A
  • A Reconciliation of the costs for the project, against the value. Including for any adjustments for liabilities such as late invoices, over/under measures etc.
  • It provides a running account of the profitability of a project.
36
Q

N36. What is a Surveyor Report?

A

• A report that advises on the amount of cash we are expecting to receive, the amount of cash outstanding from previous valuations and certifications, and the final date for payment.

37
Q

N37. What is a Materials Reconciliation?

A

• A report that advises on the material buying gains, by comparing the price allowed at tender to the actual buying price.

38
Q

N38. What is the Construction Industry Scheme (CIS)?

A

• A system where typically 20% of a payment to sub-contract labour is deducted at source and paid straight the HM Revenue.

39
Q

N39. What are the benefits of using hired plant?

A
  • Well maintained plant.
  • Can be supplied with an operator.
  • Can get recommendations on the best plant for the job.
  • Options on lease lengths etc.
40
Q

N40. What tax benefits can you get when purchasing plant?

A

• Capital Allowances.

41
Q

N41. What should you consider when employing a sub-contractor in Cash Flow Terms?

A
  • Set payment terms to reflect the main contract.
  • Schedule of valuation dates, with valuations to be submitted before yours to allow for incorporation into your valuations.
  • Extend payment terms beyond yours to improve cash flow.
42
Q

N42. What are the Four Stages of a risk assessment?

A
  1. Identify the risk.
  2. Evaluate the risk in terms of severity and impact.
  3. Produce a response to the risk, i.e. take measures to mitigate it.
  4. Report back how successful the mitigation method was for future application.
43
Q

N43. What is Value Engineering?

A

• An approach undertaken to try and deliver the employers requirements at minimum cost, without compromising the quality or function required.

44
Q

N44. What is Value Management?

A

• A method of identifying the most important aspects of a project from the client’s perspective, and ensuring that they are achieved to the required standard. Any left over budget can be used on the less important aspects.

45
Q

N45. What is included within preliminaries?

A
  • Supervisions.
  • Welfare.
  • Mobilisation/demobilisations.
  • Temporary Service
  • Site Offices.
46
Q

N46. What is the full name of the construction act, and the act that amended it?

A
  • Housing grants, construction and regeneration Act 1996.

* Local Democracy Economic Development and Construction Act 2009.

47
Q

N47. What did the construction act introduce?

A
  • Removed paid when paid clauses.
  • Statutory right to adjudication.
  • Right to interim payments for contracts over 45 days.
  • Right to know how much is to be paid, informed about the amount due.
  • Right to Suspend performance for non-payment.
  • Dates for payment should be set out in the contract.
  • Payless Notices.
48
Q

N48. What is considered to be good commercial management?

A
  • Regular reporting.
  • Regular Cash Flow Forecasting to understand position.
  • Forecast Final Accounts.
  • Valuing and agreeing variations early.
  • Clear accurate valuations.
49
Q

N49. What would you say the difference between a Commercial Manager and a Quantity Surveyor is?

A
  • A Commercial Manager is there to maximise profits.

* A Quantity Surveyor is there to run the financial aspect of a project efficiently.

50
Q

N50. What is a cost?

A

• Any outlay for a building project.

51
Q

N51. What is value?

A

• Money in and assets.

52
Q

N52. What factors affect the cost of a building?

A
  • Location.
  • Time of year.
  • Shape.
  • Materials.
  • Site conditions.
  • Ground Conditions.
  • Access to services.
  • Access to site.
53
Q

N53. What is a Project Bank Account?

A
  • An account which all payments down the supply chain are made from.
  • I.e. the client will pay the main-contractor, whilst also certifying payment for the sub-contractors etc.
54
Q

N54. What are the issues with Project Bank Accounts?

A
  • They undermine the Main contractors responsibility to manage and pay sub-contractors.
  • Can completely undermine the Main Contractor as the client can see the margins the Main Contractor is making on its sub-contractors.

KF APC Revision (17 decks)

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