Project Finance Flashcards
What is loss and expense ?
A contractors claim for loss and expense at the same time as an extension of time. It is the money required for delay and disruption, inefficient working and/or employing more resources.
“What are common heads of loss and expense?
What are common heads of Claims? (HASAN)
“
“1. Additional cost: inflation, additional work, prolongation
2. Site office overhead / Prelims
3. Head office overhead: formulas?
4. Disruption
5. Loss of profit/business opportunity
6. Finance charges”
“What are the Claims particulars ?
“
“1. Notices, preconditions, timebars, EWN
2. Contractual entitlement
3. Cause and effect
4. Records of costs incurred”
How to avoid claims ?
“1. Balanced risk allocation.
2. Enough design info and specs.
3. Good faith and partnering.
4. Right procurment route for level of design maturity.
5. Clear contract documents without ambiguities.
6. Challenge baseline program at earliest.
“
“Having advised the client and established the change control procedure on Project X, how was this then implemented?
How do you implement change control procedure? (HASAN)
How do you manage Change? (HASAN)”
”- Communicate Procedure as narrative and flow chart to the team and explain in a meeting. Include in PEP.
- Change control forms issued to the team.
- Setting regular change control meetings with the team.
- Maintain Register/tracker of change control.
- Ensure adherence to procedure before costing and send to client for approval.
- Ensure full impact of change captured and instruction issued after client signature only.”
“Your final assessment record states that you established the cost reporting protocol on project X. What approach did you take to this?
How to establish cost reporting protocol? (HASAN)”
”- Consider Procurement route,
- Report content and format,
- Frequency and timing/cut-off date of issue,
- Distribution list and means of issue,
- Interface with Client Finance team,
- Additional requirements by stakeholders/funders”
“Key issues to consider when designing change control procedures?
I see from your summary of experience that you advised the client and implemented a change control procedure on your project X. Can you tell me the key issues you considered in advising the client upon the procedure to be adopted?
How do you establish/design change control procedure? (HASAN)”
“1. Project procurement route and impact during design and construction
2. identify key decision makers to approve changes
3. Client’s priorities from monitoring change?
4. change control procedure process and forms
5. evaluation and measuring change
6. costs to include in evaluating change, finance, professional fees, vat
7. responsibility and communication matrices for raising changes
8. the contract mechanism to administer the change control management system.
“
“What measures can be taken to effectively control costs during the construction phase of a project?
Post-contract cost control tools? (Hasan)”
“Regular cost reporting which is also forward looking
Proactive risk and contingency management
Implementing a robust change control process
Management of provisional sums within budget
Final Account”
What is RIBA Plan of Work stages? (2013), for 2020 change developed design by spatial coordination
“Stage 00 – Strategic Definition
Stage 01 – Preparation and Brief
Stage 02 – Concept Design
Stage 03 – Developed Design
Stage 04 – Technical Design
Stage 05 – Construction
Stage 06 – Handover and Close Out
Stage 07 – In Use
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What is Cost control? and Procedures you undertake to cost control?
“Process of controlling costs of activity, process or company. includes procedures to:
1) detect variance between budgeted and actual cost.
2) detect cause of cost variance.
3) Corrective measure to re-align actual cost with budget.
“
What are the cost control tools?
“Pre-Contract: Cost Plan, PTE
Post-Contract:
1. Cost Report,
2. Risk Management
3. Provisional Sum
4. Change Control
5. Final Account”
Finance control? What is it about?
“Financial management of activities to achieve desired ROI. Involves:
1) Capital investment of project,
2) Professional/legal fees,
3) Finance charges,
4) Lifecycle cost (operation and maintenance).
“
Finance Control tools?
Financial statements (budget, income, balance, cashflow, equity)
Cost Monitoring?
Proactive continuous monitor of cost impact o: changes and risks, and, items in design, and instructions.
Provisional Sum ?
“NRM2: Sum of money set aside to carry out work that cannot be described and given in quantified items (in accordance with the tabulated rules of measurement). Types: defined and undefined.
Defined: Nature of work, quantity indicate scope and extent, How and where to be fixed to building, Restrictions/limitations.
“
Impact of defined and undefined provisional sum?
Defined PS allow Contractor to Price for PS in time related Preliminaries and allow time in programme. Undefined contractor cannot price for Prelim and allow time in programme
PC Rate/ Prime Cost Sum
NRM 2 definition is a sum of money included in a unit rate to be expended on materials or goods from suppliers (e.g. supply only ceramic wall tiles at £36.00/m2) no OHP
I am client in Fidic RB 99. I want to fix specific floor finish what mechanism allow me to do so in contract?
PS, PC, or NSC?
How do you administer the cost during the post contract stage?
”* Through cost report.
* Breakdown costs into elements then compare elemental actual cost against budgeted.
* then monitor and report variance, variance root cause, and possible corrective measures/source of fund, address any risk of cost-overrun after projection final contract amount.
* Example- Main works > Tower A, Podium, basement > Tower A Structural/MEP/Finishes > Tower A structural > Masonry, Concrete, Metal > Concrete
What is change control management? Variation?
“Change control management: method to assess and manage changes in terms of scope, cost, and program to allow the client to make informed decision.
Variation: alternation to scope, size, quantity, quality, dimension of works or sequence of events”
What is Cardinal Change? why its important?
Major change over and beyond project scope of work. provide relief to contractors in some juridiction from being bound to change instruction not relevant to scope of work.
Reasons for Variations ?
“client instructions, design error/omission, site conditions.
Driven by: technological, VE, cost saving, revised drawing, social, environmental, regulations/legal, aesthetics, unforseen issues”
What is BIM? How it benefits Change control management?
“BIM: Process for creating and managing information on a construction project across its life cycle.
BIM benefits: Reduce waste and improve efficiency
enable swift assessment of alternative design proposals
Help visualize changes”
PEP?
Project execution plan (PEP): An overarching document that provides the framework to execute, monitor, and assess and control the project.
Scope creep?
unauthorized/controlled changes to project scope without considerations for implications on time, budget, resources, and final deliverables.
What are change control forms?
RFC, ARF, EI, AVI
“What do you include in RFC document?
Where you have initiated a change yourself, can you tell me the information that you included on the Change
Proposal (RFC) prior to presenting to the client?”
”- Change description and reason
- cost impact
- time/program impact ( coordinated with planning )
- functionality/quality impact (coordinated with design team)
- attach relevant drawings and specs
- impact on professional fees
- Source of funding (budget contigency, Provisional Sum, additional fund)
- Date required for approval
- consequence of late approval/rejection
- relevant risks
“
How do you establish/design change control procedure? (HASAN)
“1. Procurement route? How it will impact
2. Contract Change Mechanism
3. Process and forms
4. Client priorities
5. Key decision makers, approvers
6. Responsibility and communication matrices
7. Costs to include, finance, vat, etc..
8. Evaluation and assessment”
“How have you managed Change procedure in your project?
How have you implemented change control procedure?”
“1. Process Flow chart
2. Meetings
3. Register/log.
4. Scope control of Contract and previous variations.
5. KPIs for turnaround of documents and ensure instructions issued only after Client’s sign.”
“What is change control mechanism in your project?
Talk about FIDIC 99 Change procedure?”
“Cost conultant raise RFC to Engineer. If Engineer/Client approve then:
Route-1 13.1 ARF prepared by QS based on estimation no proposal, This is for direct intiaitng VO Engineer instructs or request Contractor (via EI or RFP under 13.1) to perform VO without waiting contractor proposal, Contractor bound to do VO before submiting proposal. Fast start. Contractor bound unless cannot readily obtain goods send notice to Eng.
Right to vary: Engineer Intiate Variation by EI or RFP under 13.1, Contractor bound to perfom VO without dealy unless give notice cannot readily obtain GOODS (Engineer must repsond by confirm, vary, or cancel).
Route-2 13.3 Engineer submit RFP, Contractor respond with RFP or reasons why cannot comply, QS do ARF based on RFP, if Engineer approve ARF and Proposal issue EI, or Engineer dissapprove with comment. (Route -2 EI issued after Proposal approval).
Variation procedure: Engineer intiate RFP, Contractor respond as soon as practicable either reasons for not complying or with proposal include 1) proposed work decription and duration 2) modification to programe/time for completion, 3) evaluation proposal. Engineer then respond by apporve or disapproval with comment.
In both routes final value AVI assessed and agreed after assessement of varied works. Mesurment and evaluation under Clause 12.
Route-3 13.6 Dayworks - FASTEST/incidnet/minor, For minor works and incidental in nature. If no dayworks schedule in appendix to tender this clause not valid. Engineer may instruct under this subclause. Contractor submit quotation before ordering goods for approval, and for payment submit invoice/receipts. everyday contractor submit records (3Ms) of previous day, Contract must submit priced statement of 3ms records before inserting in application for interim payment 14.3
13.2 Value Engineering: Contractor at any time may submit proposal for VE, if accelerate work, reduce cost, improve effiecncy, other benefit to client. FIDIC provide incetive to contractor by 50% of cost saving of such excercise subject to engineer approval and considering quality and operational requirements.
13.5 Provisional Sum: No details for defined and undefined in fidic and no details for impact on prgramme. Provisional sum can be expended only by Engineer, Through instruction VO (13.1), or Nominated Subcontractor (5). Price adjusted by Engineer based on actual cost of contractor + OHP from BOQ/Schedule or Appendix to tender.
13.7 Adjustment Change in Legislation: Contractor entitled for Time and Cost for change in laws after basedate. should submit claim notice 20.1
13.4 and 13.8?”
When contractor entitled for new rate?
“12.3 (b) Test When works instructed as VO under 13 and no specified rate, and no similar item in contract because work performed under different circumstances
OR12.3(a) test for measured works if all 4 below are met
1. When change in QTY > 10%, AND
2. Change in Qty x rate > 0.01% Accepted Contract Amount AND
3. Change in QTY changes cost per unit > 1%, AND
4. Items not specified as fixed rate.”
What is Basedate?
28 days before last day for tender submission
If Contractor submit VE proposal and its contain elements designed by Contractor at his own Cost What is your advise?
Must have PII for CDP
If you are a Contractor and received verbal instruction by Engineer what you will do?
Must I write within 2 working day to Engineer to confirm in writing the verbal instruction, if no respond from Engineer within 2 working days then my writing to engineer is the written instruction.
When Engineer right to issue VO cease?
After TOC
do you know significance of TOC? what you advise your client before TOC issued?
“1. Engineer right to vary cease
2. DLP begin
3. First half or 40% Retention release
4. Delay damages cease
5, Insurance and works protection transfer to client
6. Performance bond may decrease by 50%”
What is Value Engineering? and Value Management ?
“Definition:
VE: Systematic approach to deliver the required function at required quality with least cost. or increase Performance for same cost.
VM: Proactive multi-disciplinary approach performed at strategic definition of the project to define what value means to all stakeholders and maximize value for money.
Why: VM To for strategic decisions (right project for objectives). VE: Right delivery strategy for performance/function.
When: VM Proactive at earliest to maximize value
VE preferable at outset put usually reactive
Report to VM report to Client/stakeholders VE report to project technical team”
Cost reduction vs VE?
“Value engineering: Maintain same performance with less costl alternatives OR increase performance with the same cost, sometimes it will increase overall cost put performance cost ration will be more than before.
Cost reduction: cutting costs by reducing quantum or performance requirements of the works.”
Value engineering steps?
“1. Info
2. Function Analysis
3. Creative Thinking
4. Evaluation
5. Development
6. Implementation “
Value Engineering techniques
- Function analysis i.e. value tree and mind map, 2. FAST diagram, 3. Function performance specification, 4. weighing and evaluation
