Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

APC - Quant Surveying 2021-22 > Project Finance > Flashcards

Project Finance Flashcards

1
Q

What is the purpose of a cost report?

A

1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What would you include in a cost report?

A

2

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a cash flow forecast?

A

financial planning tool that shows the predicted flow of cash in and out of a project. This is typically shown month by month, for the duration of works

During construction phase the cashflow projection for contractor payments will typically form a S curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What could affect a contractor’s cash flow post-contract?

A

4

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How would you put together a cash flow? What is it used for?

A

5

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Talk me through how you would complete an interim valuation from receiving the contractor’s application to issuing the documents, including timescales.

A

6

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What would you advise a Client if a Contractor’s Application for Payment was grossly different to your cash flow forecast?

A

7

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

If the contractor has submitted a valuation which is much greater than the forecast final account and the QS doesn’t issue a payment notice, what happens?

A

8

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the benefits of plotting actual expenditure against predicted?

A

9

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Why do we have a change control procedure on a project? How does the QS contribute to this?

A

10

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

In cashflow forecasting how is retention dealt with?

A

11

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What does the term front loading mean?

A

12

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What could it suggest if the Contractor is applying for interim valuations for far greater value than the cashflow forecast?

A

13

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What shape would you expect a construction cashflow to follow – why

A

An S curve.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What should you do if a Contractor fails to submit a valuation

A

15

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Explain the process of including Materials Off-Site within your interim application

A

16

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a vesting certificate and what is this protecting against

A

17

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a payment notice?

A

A notice to the employer to pay the contractor the amount agreed at the last valuation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

When carrying out a valuation, the previous months Payment Recommendation and Payment Notice are different, which one takes precedence?

A

The payment notice as this is what has been issued and paid to the contractor by the employer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are the JCT rules for valuing a variation

A

20

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are dayworks? What are the risks associated with using them?

A

21

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is cost reporting?

A

A document that is produced periodically that sets out the financial position of a project

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How do you communicate cost reports?

A

Email to the client prior to a meeting. Present in a meeting to help understanding or solve queries / questions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Why cant you use interim valuations instead of a cost report?

A

Interim valuations only show expenditure to date
If a variation has been instructed but works not complete this will not show.
If works is done in phases, interim valuation may not show the full picture with regards to the cost to the client.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

How do you conduct cost reporting pre contract?

A

Reconciliation between cost plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How is risk dealt with under NRM?

A

NRM recommends that risk allowances are not a standard percentage, but a properly considered assessment of the risk, considering completeness of the design and other uncertainties such as the extent of site investigation undertaken.

27
Q

Can you tell me the 4 risk categories identified in NRM?

A
  • Employer change risk
  • Employer other risk
  • Design Development Risk
  • Construction Risk
28
Q

What would you include in a financial report?

A

1) Contract Sum
2) Instructed Variations
3) Potential future variations as advance warnings
4) Claims
5) Anticipated Final Account
6) Total of certified payments

29
Q

What is the purpose of a financial report?

A

Report against budgeted values and act as cost check
Give client understanding of savings or additional costs
To report on contract progress against pre contract predictions

30
Q

What do you include within a cost report?

A
  • Executive Summary
  • Cost Summary
  • Cost Reconciliation
  • Instructions
  • Potential / Anticipated Variations
  • Claims
  • Cash flow
31
Q

What are the main types of cash flow forecast?

A

OC and PC

Cashflow of a company (contractor or consultant) - Organisational Cashflow

Cashflow of particular construction contract or project - Project Cashflow

32
Q

Main difference between employer cashflow and contractor cashflow forecasts?

A

Contractor cashflow will show construction costs (material, labour, plant, prelims etc.)

Employer cashflow usually consider the project in the wider context - include costs such as;

  • Consultant and legal fees
  • Financing
  • Marketing and sales charges
  • Land Acquisition charges
33
Q

How will the employer benefit from accurate cashflow forecasts?

A

assist with planning expenditure and ensure that an appropriate level of funding is in place for future payments

enable employer to plan and anticipate for periods of cash shortage and take corrective action where neccesary

Allows employer to gain understanding of potential financial commitment at specific point in future

Project can also act as sense check for monthly contractor valuations

34
Q

if payments to the contractor are behind the projection, what might this indicate?

A

This could be an indication that construction works are behind programme

35
Q

If the contractor monthly valuation is ahead of the cashflow projection what might this indicate?

A

The project is ahead of programme, or the contractor is overclaiming

36
Q

what is the purpose of post contract cost reporting?

A

1) Provide an overview of clients current financial commitment
2) To inform client of likely outturn cost of the project
3) Give client understanding of potential savings or additional monies required

37
Q

What information would you include in a post contract cost report?

A 
exec summary
contract sum
instructed variations 
potential future variations - advance warnings
status of any claims
cost plan
VE options
Anticipated final account (forecast)
Risk allowances
Final account progress
total of certified payments
cashflow forecast
recommendations / next steps
38
Q

Whats the difference between cost and price?

A

Cost - total of labour, plant, materials and management deployed in relation to building work

Price - amount the employer will ultimately pay for the work to be completed

39
Q

Contractor on your project has made a large and unrealistic claim for loss and expense. How would you deal with it within your cost report?

A
  • report the contractors claim and highlight my concern with figure submitted
  • assuming CA has agreed loss and expense claim is valid, would carry out my due diligence checks and assess the claim
  • update my client on regular basis until conclusion was reached
40
Q

Can you explain what the ‘base cost estimate’ should include?

A

Evolving estimate of known factors without any allowances for risk and uncertainty or element of inflation

The sum of the works cost estimate, the project design team fees estimate and other development / project costs estimate

41
Q

What is a cost plan risk allowances?

A

sum included to cover unknown costs or unmitigated risks during the project

42
Q

What is a cashflow projection?

A

Cashflow projection / forecast is a financial planning tool that shows the predicted flow of cash in and out of a project. This is typically shown month-by-month, for duration of the project

When contruction phase is underway the cash flow forecast for contractor payments will typically form an ‘S’ Curve

43
Q

What are advanced payments?

A

Payments issued to the contractor in advance of completing works or procuring materials

Usual rationale for these payments is to assist the cashflow required to cover initial expenses. E.g. Procurement of items with long lead in period (structural steelwork)

44
Q

What are the disadvantages of advanced payments?

A

Commercial risk for employer - contractor or supplier could go into liquidation after payment made

Payment will affect employers cashflow

Subject to nature of advanced payment, there could be a concern as to why the contractor is unable to fund the expenditure

45
Q

Assuming the employer is happy to proceed with advanced payment, what measures could be put in place to protect the employers commercial risk?

A

An advanced payment bond may be required to protect the payment in advance of the works being completed

46
Q

What is an interim valuation?

A

Document put forward by the contractor which contains there progress against each of the work elements

Interim valuation involves revaluation of the whole work, not the work done since the last interim certificate or payment notice was issued

Document acts as a precursor to issuing the next interim payment certificate

47
Q

What are the main elements of an interim valuation?

A 
Prelims
Measured works
Variations (compensation events in NEC)
Extension of time and acceleration (JCT)
Materials on site 
Materials off site
Loss and expense (JCT)
Adjusted Prov sums (JCT)
Retention
Fees
Prime cost sums 
OH&P
48
Q

How would you assess the interim valuation?

A

Involves QS visiting site and checking the works by visual inspection and/or measurement

49
Q

What are the key steps of an interim valuation?

A

1) Review valuation prior to visiting site
2) Go to site and review the valuation with the contractor
3) Check work completed, materials on site, materials off site
4) Liaise with the Clerk of works
5) Value prelims, agree variations and claims
6) Agree recommendation with Contractor
6) Send recommendation to the CA or PM who will issue the payment certificate

50
Q

What are the implications of over or under valuing the works?

A

An interim valuation must be a realistic assessment.

Al low valuation creates unreasonable financial problems for the contractor, whereas a high valuation creates risk to the employer of paying sums for work not done

51
Q

What would you do if the contractor claims for paint in their 1st Interim valuation?

A

Assuming project is a new build, the contractor is likely to be front loading. I would assess if they had done any painting during my site visit and adjust the valuation accordingly.

52
Q

What are the key things you should consider prior to valuing materials off site?

A

Subject to contract requirements:
- Request a vesting certificate

  • Check that insurance is in place until materials arrive on site
  • Ask for evidence that materials stored off site are clearly marked for the project and are set apart from other materials
  • Check the materials off site bond has been provided
53
Q

What is a vesting certificate?

A

Document evidencing that ownership of goods or materials will transfer from one party to another on payment

54
Q

What does the term ‘payment on account’ mean?

A

‘On account’ means a payment for an item of work for which no instruction has been issued but is anticipated

Payments ‘on account’ are used by the QS for any item in a valuation that cannot be agreed under the contract rules, but both sides agree that some payment is due

55
Q

Can you explain what is meant by the term ‘Daywork’?

A

Basic principle is that work done is recorded on a daywork sheet together with the labour, material and plant utilised to carry out the work

Generally used when work cannot be priced in the normal way or for uneconomical work

56
Q

What is a variation?

A

An alteration to the scope of work originally specified in the contract.

Can be an addition, omission or substitution to the works, or through a change to the manner in which the works are to be carried out.

57
Q

What information is typically shown on a payment certificate?

A
  • Date of certificate
  • Contract date
  • Key payment timelines (due date, assessment date, final date for payment etc.)
  • Employer, contactor and CA details
  • Site address and project number
  • Contract sum
  • Certificate ref. number
  • Gross value
  • Retention
  • Cumulative total of previous payments
  • Amount due (excluding VAT)
  • Project Partner / director and CA signature
58
Q

What happens if the employer fails to pay the amount due (shown on pay cert) on or before the final date for payment?

A
  • Employer will be liable for interest on the amount due (subject to contract conditions)
  • The contractor may wish to exercise their right to suspend works
59
Q

What is a pay less notice?

A

The purpose of a pay less notice is to give the paying party the right to pay less than/withhold all or part of the notified sum

60
Q

What are the employers obligations if they wish to withhold the notified sum, but fail to issue a pay less notice?

A

If the paying party does not serve a valid pay less notice timeously, they are obliged to pay the notified sum without deduction, regardless of whether they have a valid challenge to the sum

61
Q

Can you explain the payment timeline for the JCT D&B 2016 contract?

A

??

62
Q

Can you explain the payment timeline for the NEC3 ECC Contract?

A

??

63
Q

What is a final account?

A

The conclusion of the contract sum (including all necessary adjustments) and signifies the agreed amount that the employer will pay the contractor

64
Q

What are the usual components of a final account?

A
  • Summary
  • Measured Work
  • Variations
  • Adjusted prime costs and Prov sums
  • Claims
  • Fluctuations
  • Total of interim certificates prev paid to contractor
  • Delay damages
  • Retention
  • Fees
  • OH&P
  • Original contract sum
  • Final account sum

APC - Quant Surveying 2021-22 (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions