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RICS APC QS + CM > Project Finance > Flashcards

Project Finance Flashcards

1
Q

What are the typical cost manager responsibilities on a construction project?

A
  • Manage risk allowance expenditure
  • Initiate action to avoid overspend
  • Prepare pricing documents for tendering
  • Evaluate and analyze tender bids
  • Prepare interim valuations
  • Value variations and compensation events
  • Assess the contractor’s financial claims
  • Negotiate and agree final accounts
  • Issue financial reports or statements
  • Provide initial cost advice on capital investment costs
  • Produce cost estimates and cost plans
  • Provide advice on whole life costs
  • Produce cost reports, estimates and forecasts
  • Prepare and maintain cash flow forecasts
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2
Q

If you are producing cost estimates and cost plans, which measurements rules represent industry best practice?

A

New Rules of Measurement (NRM)

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3
Q

Can you name the 3 documents in the NRM suite?

A
  • NRM1 - Order of cost estimating and cost planning for capital building works
  • NRM2 - Detailed measurement for building works
  • NRM3 - Order of cost estimating and cost planning for building maintenance works
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4
Q

Can you provide a brief overview of each of the NRM documents?

A

NRM1 - Provides guidance on quantification of building works for the purpose of preparing cost estimates and cost plans. It is the “cornerstone” of good cost management of construction projects, enabling more effective and accurate cost advice to be given to clients and other project team members, as well as facilitating better cost control.
NRM2 - Is written mainly for the preparation of BOQs and quantified schedules of works, although the rules will be invaluable for designing and developing standard or bespoke schedules of rates.
NRM3 - Gives guidance on the quantification and description of maintenance works for the purpose of preparing initial order of cost estimates. The rules also aid in the procurement and cost control of maintenance works.

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5
Q

What is the structure of the NRM 1?

A

Part 1: General Introduction
Part 2: Measurement rules for order of cost estimate
Part 3: Measurement rules for cost planning
Part 4: Tabulated rules of measurement for elemental cost planning
- Appendices

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6
Q

What is the structure of the NRM 2?

A

Part 1: General introduction
Part 2: Rules for detailed measurement of building works
Part 3: Tabulated rules of measurement for building works
- Appendices

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7
Q

What is the structure of the NRM 3?

A

Part 1: General introduction
Part 2: New rules of measurement for building maintenance works
Part 3: Measurement rules for order of cost estimating (renewal and maintain)
Part 4: Measurement rules for cost planning and renewal (R) and maintain (M) works
Part 5: Calculation of annualized costs for renewal (R) and maintain (M) works
Part 6: Tabulated rules of measurement for elemental cost planning
- Appendices

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8
Q

Why is it important to measure the works according to industry standards and best practice?

A
  • To provide consistency and greater accuracy of pricing

- To ensure that all parties price on the same basis and therefore reduce the risk of dispute

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9
Q

Is it mandatory for chartered surveyors to follow the procedures set out in the NRM?

A

Following NRM is not a mandatory requirement. However, when an allegation of professional negligence is made against a surveyor, the court is likely to take account of the contents of any relevant guidance notes published by the RICS in deciding whether the surveyor had acted with reasonable competence

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10
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 risk, considering completeness of the design and other uncertainties such as the extent of the site investigation undertaken

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11
Q

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

A
  • Employer Change Risk
  • Employer Other Risk
  • Design Development Risk
  • Construction Risk
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12
Q

How does NRM define the “cost limit” of the project?

A

Cost limit (or authorized budget or approved estimate) - means the maximum expenditure that the employer is prepared to make in relation to the completed building

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13
Q

Can you explain what the “base cost estimate” should include?

A

Base cost estimate - means an evolving estimate of known factors without any allowance for risk and uncertainty, or element of inflation. The base cost estimate is the sum of the works cost estimate, the project/design team fees estimate and the other development/project costs estimate

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14
Q

What are the GRIP stages of work?

A
  • Output definition
  • Project feasibility
  • Option Selection
  • Single Option Selection
  • Detailed Design
  • Construction, Test, Commission
  • Scheme Handback
  • Project Closeout
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15
Q

What is a Cost Plan?

A
  • The cost plan is typically prepared by the cost consultant and provides an estimate of what the actual project cost is likely to be
  • The cost plan identifies the client’s agreed cost limit and how the money is allocated to the different parts fo the project
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16
Q

Other than predicting the final project cost, what other benefits does the cost plan provide to the project and the project team?

A
  • Designers are aware of the cost implications of their proposals which enables them to arrive at practical and balanced designs
  • Provides information upon which the employer can make informed commercial decisions
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17
Q

What sources of cost information and data are available when preparing a new cost estimate or cost plan?

A
  • Information produced by the BCIS (Building Cost Information Service), data is available on a wide range of building types
  • Published pricing books such as SPON’s and BCIS (the information may need adjusting for inflation)
  • Pricing documents and other information from previous projects
  • Cost analysis and cost models produced in-house
  • Speaking directly to contractors, subcontractors and suppliers for cost information
  • Existing client information - benchmark data from previous projects
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18
Q

How do you take account of the project location and why?

A

A location factor is usually applied to recognize differences in construction prices. For example, a project in London is typically more expensive than a similar project in Nottingham

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19
Q

What are some of the key reasons why we have cost overrun on a project?

A
  • Ambiguous client brief or changes in the later stages of the project
  • Unrealistic cost estimates
  • Project risk is realized or not properly managed
  • Inadequate management control or processes
  • Uncoordinated design
  • Unknown external factors (for example global pandemics)
  • Unsuitable tendering and/or procurement strategy selection
  • Statutory authority influences such as onerous planning permission conditions
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20
Q

What is BWIC?

A
  • BWIC stands for builder’s work in connection and is usually set as a percentage of the services cost
  • BWIC refers to builder’s work that is necessary to allow other works to proceed (typically mechanical and electrical services but also other specialist installations)
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21
Q

Why is VAT usually excluded from the cost plan?

A

Employers my incur different levels of VAT (some might be exempt). Therefore, VAT is usually excluded to ensure the incorrect tax rate is not applied.

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22
Q

Can you tell me what you understand by the term benchmarking?

A
  • Benchmarking is the use of historical data from projects of a similar nature
  • Can be used as a comparison or check for cost planning purposes
  • Benchmarking can highlight areas of design that are not value for money; or, if the price offered by the contractor is in line with market conditions
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23
Q

How would you undertake a benchmarking exercise for your client?

A

Produce a clear document which shows the various cost plan elements side-by-side with the benchmark project(s). This process will identify items which are considered abnormal, I would then endeavor to justify cost anomalies for flagged items

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24
Q

What are prime cost sums?

A
  • A sum of money included in a unit rate to be expended on materials or goods from suppliers (e.g. supply only ceramic walls tiles at £36.00/m2)
  • It is a supply only rate for materials or good where the precise quality is unknown
  • Prime cost sums exclude all costs associated with fixing or installation, all ancillary and sundry materials and goods required for the fixing or installation of the materials or goods.
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25
Q

What is the difference between prime cost sums and defined provisional sums?

A
  • A prime cost is limited to the cost of supplying the relevant item and does not include the cost of any work that relates to it (such as its installation)
  • In contract, defined provisional sums include allowances for supplying the item and all related work to be performed by the contractor
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26
Q

Can you name some of the pricing documents we might use at tender stage?

A
  • Bill of Quantities (BoQ)
  • Schedule of Rates (SoR)
  • Contract sum analysis
  • Schedule of work
  • Priced activity schedule
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27
Q

Can you name some of the pricing options for construction contract?

A
  • Lump sum
  • Cost reimbursable
  • Remeasurement
  • Target cost
  • Guaranteed maximum price (GMP)
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28
Q

What is value engineering?

A

Value engineering is typically done when something goes over budget - by looking at the selection of materials, plant, equipment and processes to see if a more cost-effective solution exists that will achieve the same project objectives.

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29
Q

What is value management?

A

Value management is a team-based approach used to define the client’s objectives and ensure best value, whole-life solutions are selected to satisfy those objectives. It is not necessarily about cost cutting.

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30
Q

Where could you find tender pricing information?

A
  • SPONS
  • BCIS (Building Cost Information Service)
  • In-house data
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31
Q

What are the payment timescales for the JCT Design and Build 2016 Contract?

A
  • Contractor required to make an interim payment application before each INTERIM VALUATION DATE (Cl. 4.7.3)
  • Subsequent 7 days is the Due Date (Cl 4.7.2)
  • Then no later than 5 days a PAYMENT NOTICE is issued by Employer stating the sum it considers to have been due on the Due Date. Other application becomes a payment notice (Cl. 4.7.5)
  • A payless Notice may be issued no later than 5 days before Final Date for Payment (Cl 4.9.5)
  • 14 days (Cl. 4.9.1) from due date is final date for payment
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32
Q

What is a lump sum contract?

A
  • Fixed price lump sum pricing, provides payment for a set amount
  • The amount of the fixed price or lump sum is determined by a contractor by estimating their cost to provide the work, and then adding overhead and profit margin.
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33
Q

What are the key advantages and disadvantages of lump sum contracts?

A

Advantage: the contractor takes on the pricing risk but stands to benefit from increased profit if actuals costs turn out to below the estimated costs.
Advantage: Cost certainty from the employer
Disadvantage: this agreement represents a higher risk to the contractor. if the contractor underestimates their cost, the profit margin decreases and may disappear altogether
Disadvantage: As a result of the additional risks faced by the contractor, they may increase their tender price

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34
Q

What is a cost plus contract? (cost reimbursable)

A

Cost-plus contracts involve the employer paying the contractor for the costs incurred during the project, plus a pre-agreed percentage for profit

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35
Q

What are the key advantages and disadvantages of cost plus contracts?

A

Advantage: Inaccuracies in the initial bid aren’t as detrimental as they are with lump sum contracts
Advantage: Allow employers to make design changes along the way, contractors know they’ll be paid for the extra time for materials which those charges incur
Disadvantage: The final price is uncertain until the end of the project
Disadvantage: Contractor may deliberately incur higher costs to increase profit (no incentive for efficiency)

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36
Q

What is a remeasurement contract?

A
  • Works are carried out based on pre-agreed unit rates
  • The actual quantities of work carried out are measured and the tendered rates are applied to those quantities
  • The contractor is paid for the actual work they have done so the final value of the project will be derived based on the unit prices and exact quantities
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37
Q

What are the key advantages and disadvantages of remeasurement contracts?

A

Advantage: Since the work is tendered on approx quantities, the contractor will submit competitive prices in their tender.
Advantage: The contractor’s risk is comparatively low
Disadvantage: There is less cost certainty until the project is complete
Disadvantage: General accuracy of cost forecasting
Disadvantage: the risk for the employer is higher (compared to a lump sum contract)

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38
Q

What is a target price contract?

A
  • The main difference between a target and conventional contract is the mechanism for sharing risk and opportunity
  • The target cost is set early in the project, upon completion, cost savings or overruns are shared between the contractor and the employer based on a pre-arranged agreed formula or percentage. This is often termed the ‘pain & gain’ mechanism
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39
Q

What are the key advantages and disadvantages of target price contracts?

A

Advantage: the contractor and employer are incentivized to reduce costs
Advantage: Encourages active and equitable risk sharing, based on a clearly defined allocation of risk agreed at the outset of the project
Disadvantage: The employer and contractor must share pain and gain, this exposes the employer to greater risk, pain/gain share may not be easily understood by all parties

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40
Q

What is a guaranteed maximum price (GMP) contract?

A
  • A guaranteed maximum price contract (GMP) set a limit that the employer will pay their contractor, regardless of actual costs incurred
  • If the actual costs of the works is lower than the guaranteed maximum price, the contract should set out which party will benefit from the savings. Usually, the savings will be split between the employer and contractor using a pre-agreed formula or percentage
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41
Q

What are the key advantages and disadvantages of GMP?

A

Advantage: Establishes the employer’s maximum financial commitment (subject to employer variations). If the contractor’s costs exceed the target cost, only the target cost sum is paid
Advantage: Both the contractor and employer have potential to benefit from the savings
Disadvantage: The contractor will have to share any savings made while taking on the risk of cost overrun

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42
Q

What are Contractor Preliminaries?

A
  • Items which cannot be allocated to a specific element, sub-element or component
  • Prelims are typically items which are necessary for the contractor to complete the works but will not actually become part of the works once the project is complete
  • Contractor prelims may include such items such as:
    Management and staff
    Site establishment
    Temporary services
    Security
    Safety and Environmental Protection
    Insurances
43
Q

When assessing the costs for contractor prelims (at tender stage) what are the key considerations to determine if they are fair and reasonable?

A
  • Length of contract
  • Type of project (new build, refurb, Infrastructure etc)
  • Size of project and overall build cost
  • Need for temporary works
  • Security requirements
  • Method and sequencing of works
  • Extent of contractor’s design responsibilities
44
Q

Can you give me examples of contractors prelims that might be considered abnormal? (above a ‘standard’ project?)

A
  • Tower cranes
  • Evening/weekend working
  • Road closures/traffic management
  • Closing train lines
45
Q

What is the difference between fixed price and time related prelims?

A

Fixed prelims are one-off costs whereas time related prelims are dependent on duration

46
Q

What is inflation?

A

NRM1:

  • Means and upward movement in the average level of prices and or costs (i.e. the opposite of deflation)
  • It is included as an allowance in the order of cost estimate or cost plan for fluctuations in the basic prices of labour, plant and equipment and materials
47
Q

What are the two types of inflation defined in the NRM1?

A

Tender inflation - Means an allowance included in the order of cost estimate or cost plan for fluctuations in the basic price of labor, plant and equipment, and materials during the period from the estimate base date to the date of tender return
Construction inflation - Means an allowance included in the order of cost estimate or cost plan for fluctuations in the basic prices of labor, plant and equipment, and materials during the period from the date of tender return to the mid-point of the construction period

48
Q

What does TPI stand for?

A
  • Tender Price Index
49
Q

What do TPI show?

A
  • They measure the movement in prices agreed between clients and contractors at ‘commit to construct’ normally when the tender is accepted
  • These indices are typically used for adjusting estimates and budgets to different clients
50
Q

What’s meant by the term ‘functional unit’?

A

NRM1 - means a unit of measurement used to represent the prime use of a building or part of a building (e.g. per bed space, per house and per m2 of retail area). It also includes all associated circulation space

51
Q

Can you explain what GIFA is please?

A

NRM1 - Gross Internal Floor Area (GIFA) is the area of a building measured to the internal face of the perimeter walls at each floor level

52
Q

Can you explain what GEA is?

A

NRM1 - Gross external area (GEA) is the area of a building measured externally (i.e. to the external face of the perimeter walls) at each floor level

53
Q

What is wall-to-floor ratio?

A
  • The wall to floor ratio of a building is calculated by dividing the external wall area by the gross internal floor area. This indicates the proportion of external wall required to enclose a given floor area
  • This may also reveal how efficient the design is and may also help inform the construction cost
54
Q

Can you explain what the NIA is please?

A

NRM1 - Net Internal Area (NIA) is the usable area within a building measured to the internal face of the perimeter walls at each floor level

55
Q

What is the purpose of IPMS?

A
  • International Property Measurement Standards
  • IPMS for industrial, office, residential, and retail buildings have been drafted by the independent Standards Setting Committee and establishes a consistent methodology for measuring buildings around the world
56
Q

What is a BoQ?

A 
A detailed document consisting of all items which make up the components of a building as well as the prelims. It includes measures and rates for each item. Usually based on full production of drawings and project specification. This document then forms an excellent tool for pre and post contract cost control. By using the rates contained within the document, we can easily manage variations and monitor exact expenditure on site
It consists of:
- Prelims
- Preambles
- Measured works
- Prov sums
- PC sums
- Dayworks 
- Appendices (bonds, warranties etc)
57
Q

Why would you use a BoQ instead of a schedule of works?

A
  • A BoQ is more detailed

- Much easier to compare tenders

58
Q

What are the advantages and disadvantages or preparing a BoQ based on standard method of measurement?

A
  • Advantages:
  • Easier post-contract control
  • Easier tender analysis
  • Good for large complex projects
  • It should have everything in it (detailed)
  • Cost certainty
  • Disadvantages:
  • Expensive to produce
  • Time consuming
59
Q

How would dayworks be included within a BoQ?

A

Day or hourly rate for labour

60
Q

When are approximate quantities to be used?

A

For items that cannot be accurately quantified at time of tender

61
Q

What is a cash flow?

A
  • (S-Curve mechanism) Cash flow refers to the movement of cash into or out of a business or project
  • It is usually measured during a specified, finite period
  • Essentially, the cash flow statement is concerned with the flow of cash in and out of a business. The statement captures both the current operating results and the accompanying changes in the balance sheet
62
Q

How would you create a cashflow forecast?

A
  • Need to have the construction programme and cost plan
  • The cash flow can be created on a computer programme such as Excel
  • The cash flow can be created without a computer, the expected costs are attributed to each month on a simple x-y axis graph. Construction projects usually form a ‘S Curve’
63
Q

What are the key differences between employer’s cash flow and contractor’s cash flow items?

A
  • Contractor cash flow will show the construction costs and prelims
  • Client cash flow considers fee to government authorities, consultant fee, land acquisition charges, marketing, sales charges etc
64
Q

What is the benefit of cashflow forecast for the employer?

A
  • Allows employer to gain an understanding of financial requirements over the duration of the project
  • Also acts as a check against valuations - early indication of financial difficulties
  • Helps clients to plan expenditure
  • Predicting cash flow is important in order to ensure that an appropriate level of funding is in place and that suitable draw down facilities are available
65
Q

What would payments being behind cash flow imply?

A

This would imply that the project was behind programme or under budget

66
Q

What would payments ahead of the curve imply?

A

The project was ahead of programme, or the contractor is claiming for more than has been completed on site

67
Q

Why do we need to use a cash flow forecast?

A

Predicting cash flow is important to ensure an appropriate level of funding is in place and that suitable draw-down facilities are available

68
Q

Is there anything else to consider that might affect your cashflow?

A

Cash flow projections may be affected by the need for the early purchase of long-lead items or by items that the client may wish to purchase that are outside of the main contract (such as furniture or equipment)

69
Q

What is the purpose of a financial report?

A
  • to report against budgeted values and act as a working cost check on project budget
  • To give the client an understanding of any savings or additional monies required
  • To report on contract progress against pre-contract predictions
70
Q

What would you include in a financial report?

A
  • Executive summary
  • Contract sum
  • Instructed variations
  • Potential future variations as advanced warnings
  • Claims
  • Cost plan
  • Value engineering options
  • Anticipated final account total (forecast)
  • Risk allowances
  • Final account progress
  • Total of certified payments
  • Major risks or causes of concern
  • Next steps and recommendations
  • Cash flow forecast
71
Q

What is the difference between cost and price?

A
  • Cost is the total of labor, plant, materials and management deployed for a specific activity
  • Price is the amount a purchaser/client will pay for an item or product
72
Q

How can the cost report help to monitor & control the project budget?

A
  • It tracks all issues relating to cost on the project
  • Budget, forecast cost, expenditure to date
  • Remaining expenditure for all areas of the project such as consultant fees, contractor valuations, surveys, FM costs, in addition to variations/changes (approved and unapproved) and key risks,
  • identifies the final account - outturn costs vs client initial expectations
  • Life cycle costing - total cost of a building from creation to grave
73
Q

How is a risk register used in the post contract phase of a project?

A
  • The risk register is regularly updated thoughout the post contract stage (usually during progress meetings). Any new risks identified will be added to the risk register and any risks that have not materialized and are no longer a risk will be closed out. The risk register can then be used to re-allocate or give back to the client the risk allowances is they are no longer required or to obtain additional risk allowances if deemed necessary
74
Q

The contractor on your project has made a large (and in your opinion) unrealistic claim for loss and expense. How do you deal with it in your cost report?

A

I would report the contractor’s figure that they have claimed but highlight to the client that I believe this is unrealistic and that I will carry out my due diligence checks on it to ensure value for money for the client. I would then report any change to this cost once it is agreed

75
Q

Give some examples of why a project might have a cost overrun?

A
  • Employer’s objectives not clear or changed during the project
  • Unrealistic cost estimates
  • Risk allocation is ambiguous
  • Inadequate management control
  • Design not meeting planning or statuary requirements such as building regulations
  • Uncoordinated design
  • Design that is difficult to build or maintain
  • Design that does not meet the tendering or procurement strategy
76
Q

What is a life cycle cost?

A
  • It is the total discounted cost of owning, operating, maintaining and disposing of a building or a building system during a measurable period (by NIST - National institute of standards and technology)
  • The discounted Cash Flow method is used to find out the life cycle cost of a project
77
Q

Why carry out lifecycle costing?

A
  • As part of business case evaluation to work out if you can afford the building structure
  • To work out if you can afford to run it
  • As part of optional appraisal exercise to decide on the most economically advantage solution
  • To control the design development within running cost and capital cost budget
  • To provide a set of instructions and a budget for the facilities manager
78
Q

What are the advantages of life cycle costing?

A
  • Allows consideration of the long-term implications of a decision
  • Enables informed decisions to be made on material selection
  • This can result in lower operational, maintenance and replacement costs
  • Can be used to plan future maintenance requirements - Flexible spaces, easier access
  • Can be used to judge sustainability in money terms
79
Q

What are the disadvantages of life cycle costing?

A
  • Costs of defects caused by bad workmanship/design faults cannot be predicted
  • Uncertainty of available data - hard to predict life spans, future inflation and maintenance requirements over long periods
  • The client may be selling the building after it is constructed
  • Choosing the wrong discount rate can render the exercise totally useless
80
Q

What sort of clients might be particularly interested in life cycle costing?

A
  • Government clients - concerned with overall value for money
  • PFI projects
  • Owner-occupiers
  • Clients looking to incorporate sustainable technologies
81
Q

What elements should be considered when calculating life cycle costings?

A
  • Construction costs
  • Maintenance costs
  • Operational costs
  • Utilities cost
  • Admin cost
  • Overhead costs, taxes
  • Occupational costs
  • Miscellaneous
  • End of life costs
82
Q

How accurate is life cycle costing?

A
  • A lot of assumptions have to be made - on time periods, costs, trends, inflation, etc
  • Its accuracy relies on the accuracy of the assumptions
  • As the time period considered grows, the accuracy is likely to fall
83
Q

Where can you get information about maintenance costs?

A
  • Building Maintenance Cost Information Service (BMCIS) - part of BCIS
  • From subcontractors
  • From in house data
  • Previous projects
84
Q

What is net present value?

A

Where future costs are discounted from present values.

85
Q

How does the net present value method work?

A
  • It involves the comparison of the net present value of alternative options
  • It is useful at the design stage
  • Future life cycle costs - on maintenance/replacement etc - are discounted to present values
86
Q

How can life cycle costing be used in a value engineering exercise?

A

You could review the maintenance costs and the cost of an element over its life cycle. It may be that something has a higher capital cost but its maintenance and replacement costs are significantly less than a cheaper capital cost alternative

87
Q

What are advanced payments?

A
  • It allows the contractor to receive lump sum payment in advance
  • Usually paid for the procurement of items on long lead in times (for example a lift)
88
Q

What are the disadvantages of advance payments?

A
  • May reduce the incentive of the contractor
  • Bad for the employer’s cash flow
  • Concerns over why the contractor can’t fund the expenditure - insolvency worries
  • Commercial risk for the employer if the contractor goes into liquidation
89
Q

What is a valuation?

A
  • A detailed breakdown of the works and provides an appraisal of the cost of the works carried out to date
  • Precursor to issuing an interim certificate
90
Q

What are the main elements of a valuation?

A
  • Prelims
  • Measured work
  • Variations
  • Materials on site
  • Materials off site
  • Loss and expense
  • Prov sums (JCT contracts)
  • Retention
91
Q

What information is typically shown on a payment certificate?

A
  • Date info
  • Date of certification
  • Date of valuation
  • Contract date
  • Client details - Company, name, address
  • Contractor details - Company, name, address
  • Contract Administrator details - Company, name, address
  • Address of site
  • Contract sum
  • Payment due
  • Gross value
  • Less retention
  • Less previously certified
  • Amount due (excl. VAT)
  • Director’s signature
92
Q

How do you evaluate interim valuations?

A
  • Go to site and conduct/review the valuation with the contractor
  • Check work done, materials on site and materials off site
  • Value prelims, agree variations and other claims
  • Valuation amount is gross variation, less retention, less previous payment
  • Then send recommendation to the contract administrator to issue the payment certificate
93
Q

How do you value materials off site?

A
  • Request a vesting certificate: proof that ownership will transfer to the employer on payment
  • Ensure insurance was in place until the materials arrive at the site
  • The materials are clearly marked for the site and set apart from the other materials
94
Q

What is a vesting certificate?

A

A vesting certificate is a contractual term which deals with the transfer of ownership of goods and materials and a vesting certificate is a document evidencing that transfer of ownership of those goods or materials

95
Q

What are the options for conducting valuations?

A
  • Stage payments (relating to programme milestones). The stages are usually related to the completion of significant items e.g. substructure and frame
  • Periodic payments (monthly for example)
96
Q

What would you do if a contractor claims for paint in their 1st application for payment?

A
  • Assuming the project is a new build, the contractor is likely to be front loading
  • Assess if they had done any painting during the site visit and adjust the valuation accordingly
97
Q

If a contractor’s work has been certified and paid in an interim valuation, can it be devalued in a later certificate?

A
  • Payment in an interim certificate is a payment on account of the final sum
  • It is always open and can be devalued at a later certificate
98
Q

What does the term on account mean?

A

It’s a payment made to recognize works has been completed but the actual value hasn’t yet been agreed

99
Q

A junior surveyor working in your team incorrectly over certifies on an interim valuation - what do you do?

A

The first thing to do is check the facts and make sure an over certification has taken place. Assuming it has:

  • You need to check whether the valuation has been processed or not
  • If it has not, then withdraw it and re-certify
  • If the valuation has been paid, then you need to remember it is an interim certification and assuming it is not the final certificate then financially matters can be rectified next month
  • Talk to the client, explain the situation and ensure sufficient preventative measures are put in place to stop this happening again in the future (Lessons learned session)
100
Q

What is a gross valuation?

A
  • Each month the work must be valued and then an amount paid to the contractor
  • To ascertain this amount, you do not value only the work completed in that particular month. This would improve impossible and is unrealistic
  • The process is based on calculating the total amount of works completed to date and then deducting the previous month’s total
  • This then gives the value of wok completed in the current month
101
Q

What needs to be in place for you to include payments for materials on site?

A
  • Materials should be onsite and adequately protected
  • Should be covered by works insurance
  • In reasonable quality
102
Q

What needs to be in place for you to include payments for materials off site?

A
  • Proof that ownership will transfer to the employer on payment (vesting cert)
  • Insurance until the materials arrive on site
  • Materials are clearly labelled as for the site and set apart from the other materials
  • Material off-site bond has been provided if required under the contract
103
Q

In which instances would you use Dayworks to value the works?

A
  • It is generally used when work cannot be priced in the normal way when work is instructed for which there are no comparative rates in a bill quantities and a fair and reasonable rate cannot be agreed.
  • Can be used for uneconomical works

RICS APC QS + CM (11 decks)

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