Project Finance Flashcards
Level 3 - Project Finance
On you London refurbishment project, how did you advise on strategies and procedures to control predicted expenditure in line with a budget?
- Identify the clients key objectives
- Who are the key decision makers & what level of authority do they hold
- Funding requirements
- How will change be rooted to the contract?
- Confirmation of what costs should be included
How do you implement change control procedures within the contract?
- Communicate the procedure to the project team
- Notices and Instructions
- Variation logs
- Ensure procedure is followed
Level 3 - Project Finance
Why did you advise on monthly reporting regimes/protocols?
- Follow the contract payment cycle,
- affords time to capture change and update existing cost data
- Aligned with the clients reporting
- Volume of variations wasn’t high & programme wasn’t short
Level 1 - Project finance
What are the dangers of using assigned risk allowances for other aspects of construction?
- The money is no longer available to use it for its assigned risk
Level 3 - Project Finance
London refurb - You talk about reviewing the risk allowances. How did you advise your client?
- Risk allowances reviewed at regular intervals
- Decision made on expired allowance considering project status
Level 3 - Project Finance
On your Lyonsdown school project, how did you advise your client of expenditure against provisional sums?
- I advised the client that each provisional sum should be included in the cost report from the outset
- managed in isolation.
- As work is instructed an add & omit exercise to the associated provisional sums will be conducted.
Level 1 - Project Finance
What are provisional sums, how do they differ?
- Financial allowances within the contract sum for works insufficiently designed
- Defined PS allow programming, planning and works included within prelims.
Undefined PS doesn’t allow the above, contractor maybe entitled to EOT.
Level 1 - Project Finance
What impact does undefined provisional sum have?
- Prolongation to the contract
- additional preliminary charges
Level 1 - Project Finance
Where are provisional sums defined?
- NRM
- RICS guidance on cost reporting
Level 3 - Project Finance
In your monthly cost reports how did you advise your client of their predicted expenditure?
- I would present the worst-case scenario to the client,
- gradually revising the costs upon negotiations with the contractor
- Details of the variation including cost
- Status of cost (i.e, Budget)
- change in period
- Impact against the authorised budget
Level 1 - Project Finance
What are the 2 types of cash flow forecast used in reporting finance in construction?
- Organisational cash flows – which are used by a company, predict the incoming and outgoing capital of a specific period
- Project cash flows – of a particular construction contract will inform the employer of the financial requirement of the project.
What circumstance does the employer require a project cash flow?
The employer’s bank or funder needs to be aware of draw-downs to manage the movement of funds to meet the contractual timescales of payment
Level 1 - Project Finance
How do cost reports help control costs?
- inform the client of the best data
- allows the client to make informed decisions at the earliest opportunity
- overview of the project cost
- Advises on solutions to bring cost back inline
Level 2 - Project Finance
How did you prepare the project cash flow?
- I would require the contractors programme and contract sum analysis
- plot the values with each element of construction to periods of their respective installation dates
- Obtain fee drawdown schedules from consultants
Level 1 - Project Finance
What are the benefits of cash flows?
- Allows client to understand financial requirement over project term
- Allows client to organise funding
- Provides early indication of progress
What are the risks of cash flows and how can they be mitigated?
- Lack of understanding of how cashflow is prepared
Risks can be reduced by; - List assumptions
- Explain how it was prepared
How would you ensure cost control on future projects?
Cost Plan / Estimate -
* Ensure accurate & sufficient contingency to accommodate design development based on level of information provided.
* Carry out constant checks & change management as design develops.
Tender Issue -
* Ensure sufficient design information available to allow a robust tender sum to be established.
* Advise client on risk of proceeding without full information if applicable & sufficient contingency.
Tender Return -
* Cross check tender with estimate / cost plan & reconcile any major variances & reasons why.
Post Contract -
* Cost reporting & change control procedures.
* Review design on a regular basis & monitor contingency fund.
Level 1 - Project Finance
What are the contract timescales of settling a final account?
- Depends on contract
- Traditional forms - not later than 3 months after contractor provides information which should arrive not later than 6 months after PC.
- DB - Contractor should provide Final Statement not later than 3 months after PC.
- DB - If contractor does not provide Final Statement the CA can give notice on or after expiry to the contractor that unless the Final Statement is submit within 2 months of notice the Employer may themselves make assessment
