Project Finance Flashcards
What is a provisional sum
An allowance for an element of the works that is not defined in enough detail for tenderers to accurately price
What’s the difference between defined and undefined prov sums
The contractor is expected to incorporate defined prov sums into their:
Programme
Prelims
OH&P
Design risk
What’s the disadvantage to the client of undefined prov sums
The contractor may be entitled to an EoT and/ or additional payments when the works are undertaken
What’s a prime cost sum as per NRM1
A supply only rate for materials or goods
What costs does a prime cost sum exclude
Labour
Materials required for installation
Design fees
Prelims
OH&P
What are fluctuations
Financial adjustments made to the original contract to compensate the contractor for inflation
What’s the final account
The conclusion of the contract sum and signifies that agreed amount that the employer will pay the contractor
What’s the purpose of a final account meeting
To focus on agreeing the outstanding items.
What are the main headings in a final account statement
Contract Sum
Contract instructions
Provisional sum adjustments
Loss and expense
Liquidated damages
Fluctuations
What are Daywork allowances
Monetary allowances made for the costs of labour, plant and materials for ad-hoc work required throughout the contract where valuing by reference to contract rates isn’t appropriate.
Define change control
The administrative process that implements the contract mechanisms for instructing change
How are daywork allowances tracked
Daywork sheets submitted by the contractor and signed off by the CA and reported on a monthly basis
What’s the definition of a variation
Any change to the contract specs or drawings
Define contract instruction
The financial adjustment arising from instructions for variations to the contract works
Define loss and expense
Additional costs incurred by the contractor arising from delays or the disruption to the performance of the contract caused by the employer
What date in the contract are fluctuations calculated against
Base date
When is the 2nd retention release due
After the defects liability period
How is the 1st retention release dealt with if the final account Isn’t agreed but PC has been issued
The Employer is entitled to release only up to the amount they believe is payable under the contract until the final account is agreed
Whats the difference between patent and latent defects
Patent defects can be discovered via reasonable inspection
What would the preferred scenario be for dealing with a defect prior to issuing a final account
Alert the contractor of the defect and give them the opportunity to make good. The final account can then be agreed as if the defect didnt happen
What happens if the contractor doesnt make good a defect prior to issuing the final account
The Employer can employ a different sub-contractor and then deduct the cost from the final account
How is a defect dealt with during the defects liability period
The contractor has the chance to make good at their own cost. If the defect isn’t dealt with then a separate contractor can be appointed and the cost deducted from retention
How are liquidated damages deducted from the final account
Pay less notice
Whats set off/ contra charging
Where the employer recovers costs from the contractor that he contractor has caused the employer to incur
What is the standard amount of time under a JCT that the final account should be issued
No later than 3 months after receipt of information supplied by the Contractor (can be amended)
What info should the contractor provide to ascertain the final account
Substantiation of variation figures
Subcontractor quotes (if applicable)
Daywork sheets
Loss and expense claims
Build up of fluctuations
How long does the contractor have to issue their information from PC in preparation of the final account under a JCT
3 months
If a final account cannot be agreed (in dispute) what are the next steps
Ideally mediation if not adjudication then arbitration/ litigation
What are the 4 most common reasons for not agreeing a final account
Validity of claimed variations
Value of variations
Liquidated damages
Loss and Expense Claims
What should be carried out in order to ensure the final account is fair
An audit of final accounts
Why would final accounts need settling in the middle of a project
If the contractor or employer is going into liquidation or administration
Contract is being terminated
Whats the purpose of a cost report
To inform the client of the forecast cost at a given time
What are the typical financial cost report headings on your Leeds D&B scheme
Contract sum
Variations (instructed and anticipated)
Loss and Expense/ Liquidated Damages
Provisional Sums
Risk allowance
What should the QS review to identify anticipated variations
Instruction requests issued by the contractor
Drawing revisions
Spec revisions
Up to which point should the cost report apply fluctuation amounts
Up to the value of work carried out to date
Which 3 courses of action can be taken in the case of cost increases above the brief or approved budget
Omit elements of remaining work that aren’t critical for the buildings function
Reduce the scale of remaining elements
Reduce the spec of the remaining work
What should be considered when advising the client of the whole life impact of potential cost savings
Capital costs saving
Renewal cost and frequency impact
Operating costs
Maintenance costs
End of life cost
What should be considered when advising on the impacts of potential cost saving methods
Programme impact
Other cost element impacts
Statutory compliance
Asset value impact
Funding conditions
What’s the formula for calculating a prime cost sum
Prime cost = Raw materials + Direct labour
Do prime costs include labour for workers who directly contribute to the formation of the product
Yes
What are the high level cost report headings on your Leeds project
Title
Contents
Exec Summary
Finance overview
Detailed finance review
Cashflow
Project Risks
Name some finance costs (monitoring)
Interest
Valuation costs
Arrangement fee
Exit fee
Monitor fees
Are liquidated damages a penalty
No
When can liquidated damages be levied
Upon issue of a cert of non completion
What’s it’s called when the contract completion date has passed without an extension of time
The contract is at large
If a contractor says they’re in delay what can you suggest they do to get the programme back on track
Accelerate
Re sequence
Use float
How can you check that the contractor is in delay against their programme when they request an EoT
Review progress against the critical path
