Project Finance Flashcards

1
Q

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?

A
  • 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
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2
Q

How do you implement change control procedures within the contract?

A
  • Communicate the procedure to the project team
  • Notices and Instructions
  • Variation logs
  • Ensure procedure is followed
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3
Q

Level 3 - Project Finance

Why did you advise on monthly reporting regimes/protocols?

A
  • 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
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4
Q

Level 1 - Project finance

What are the dangers of using assigned risk allowances for other aspects of construction?

A
  • The money is no longer available to use it for its assigned risk
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5
Q

Level 3 - Project Finance

London refurb - You talk about reviewing the risk allowances. How did you advise your client?

A
  • Risk allowances reviewed at regular intervals
  • Decision made on expired allowance considering project status
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6
Q

Level 3 - Project Finance

On your Lyonsdown school project, how did you advise your client of expenditure against provisional sums?

A
  • 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.
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7
Q

Level 1 - Project Finance

What are provisional sums, how do they differ?

A
  • 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.

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8
Q

Level 1 - Project Finance

What impact does undefined provisional sum have?

A
  • Prolongation to the contract
  • additional preliminary charges
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9
Q

Level 1 - Project Finance

Where are provisional sums defined?

A
  • NRM
  • RICS guidance on cost reporting
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10
Q

Level 3 - Project Finance

In your monthly cost reports how did you advise your client of their predicted expenditure?

A
  • 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
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11
Q

Level 1 - Project Finance

What are the 2 types of cash flow forecast used in reporting finance in construction?

A
  • 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.
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12
Q

What circumstance does the employer require a project cash flow?

A

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

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13
Q

Level 1 - Project Finance

How do cost reports help control costs?

A
  • 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
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14
Q

Level 2 - Project Finance

How did you prepare the project cash flow?

A
  • 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
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15
Q

Level 1 - Project Finance

What are the benefits of cash flows?

A
  • Allows client to understand financial requirement over project term
  • Allows client to organise funding
  • Provides early indication of progress
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16
Q

What are the risks of cash flows and how can they be mitigated?

A
  • Lack of understanding of how cashflow is prepared
    Risks can be reduced by;
  • List assumptions
  • Explain how it was prepared
17
Q

How would you ensure cost control on future projects?

A

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.

18
Q

Level 1 - Project Finance

What are the contract timescales of settling a final account?

A
  • 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