Project Finance Flashcards
What are project costs?
plant, labour, materials, risk, overheads (offices, computing systems)
How are project costs monitored & managed
Cost report should be used to monitor and manage project costs. This along with comparing it against budget and assessing what has caused periodic changes will help with identifying risk items.
Cost report is updated as the project progresses through the stages from feasibility to construction.
How can cost be used as a measure of progress
Cost can be used as a measure of progress by comparing costs incurred against total estimated cost. This is known as the cost-to-cost measure.
Cost control techniques
Budget setting and developing the cost plan with a more accurate and comprehensive breakdown once construction phase commences splitting out all individual labour, plant, materials etc,
Monitoring costs, periodic update of cost plan assessing against budget and actuals, comparing to the programme and identify any cost increases (CE’s) or cost movement (due to delays). Contract Administration system such as Asite can be used to assist with monitoring costs. Analysis of variance on actuals against estimate should be used to identify risk items/ causes of cost overrun so mitigations can be put in place. Clear communication and sound reporting/ record keeping should be undertaken to assist with monitoring the costs and comparing client and contractor reported EFCs
Managing time effectively ensuring programme is met to prevent prolongation which leads to additional costs
Implementing change control systems to allow all change to be clearly implemented cost effectively and with the most suitable solution and with the correct process in place to approve
What were the PAS project costs
The PAS project costs were the main contractor which covered prelims (PM & CM), design, materials, plant and labour for the install of the platform end barriers and steps
The TfL project staff PM, Engineers, Commercial
TfL internal services such as cable relocator
The PAS cost report also included the internal risk contingency that was allocated to the project and used to cover any variations
What is a risk contingency, how it is calculated, why is it useful and how is it managed
Risk contingency allows for flexibility and effective responses to change orders and unforeseen risks arising at the construction phase of projects.
A lack of contingency can lead to cost and time overrun whilst appropriate procedures are undertaken to obtain additional authorities/ money.
The contingency is usually calculated based on the value on the contract (usually between 5-15% of contract value), perceived risks to the contract (is there high potential for unforeseen ground conditions), and the contract type (option E will place greater risk on Employer so more contingency usually requested)
What was the change process on PAS
Project variations/ CE’s that were assessed as a CE as per the conditions of the contract would be priced using the rates in the schedule of cost components. Internal change notice would be implemented setting out the reason for the CE and the value and revised contract value. A contingency (risk value) was allocated to the project so all CE’s were able to be locally implemented by the project with sign off from the contractor and PM. As we could close to our contingency limit I started the internal governance procedure to request further contingency to allow he project to continue to implement CE’s at project level and prevent project delays by waiting for internal governance procedures to be completed. The contingency was request based on an assessment of the value of CE’s to date and known risks to the project.
What was the portfolio workbank periodic forecast
The workbank periodic forecast was the cost report for the whole power portfolio detailing actuals to date and forecast for the remaining costs to completion. Each project was allocated a project code within the portfolio, an individual forecast was complete for each project with detailed breakdown of all PO’s internal labour, risk, etc. and each are summarised as a single line item to show to portfolio costs. One of the project codes was for the project risk (this split out the individual project risk allocations and the pan portfolio risk line)
What was the power workbank forecast used for
The forecast was used to monitor the portfolio costs and assist with budget setting. The forecast was reported on each period where I would detail the changes per project in periodic cost, YE, and EFC against the last periods forecast and the budget. I would detail the causes of these and then do a portfolio roll up advising the project on the impact of these changes in regard to budget and Project Authority.
Each period I would undertake meetings with the PM to understand changes in the project e.g. prolongation, additional works, etc. and would use this to update the forecast. I would also ensure the forecast against periods was aligned with the project programme.
How did the forecasting process on power portfolio vary depending on contract type, procurement route & stage of the project
The forecasting process was fairly similar across the different contract types in the fact it still was broken down across PO’s, internal labour, risk, etc. However the contract type would often impact the level of risk reported on.
Again the procurement route would not change the way the forecast/ reporting was undertaken or the level of information, however a design and build procurement route may have less PO’s/ internal labour for design engineers compared to a traditional procurement route. There would also be an overlap between the design & construction phases.
Finally the stage of the project would again not necessarily impact how the forecast is produced and the reporting requirements, however projects at the earlier stages will have less of a breakdown on the cost report in regard to the different types of plant, material labour etc. A provisional sum, approximate cost is likely to be used.
How was risk provisions managed on power workbank
Assessment of risk values by reviewing risk register, calculating target monetary value and allocating a risk value to the project. Each period when forecasting we reviewed the level of risk in the forecast based on the project risks and determine if the risk included is appropriate. All risk would be allocated to an event and forecast based on when that event was to occur. Once the event had passed the risk value would either be reallocated to another risk event or transferred back to the pan portfolio risk to either be handed back or used elsewhere in the portfolio.
Change control processes for project authority and risk
2 types of CRFs, 1 is a local CRF which is used to manage the portfolio authority and risk by allowing authority or risk to be transferred between projects within the approved portfolio level. These are approved at the portfolio meeting by SPM & sponsor. If additional authority is required from the business or risk is to be used/ drawn down then a CRF is also to be done at a business level and to be approved at one of the periodic APCD Change meeting.
PAS spend reporting
The spend report/ cost report was produced periodically splitting out third party cost (contractor PO) and internal costs (e.g. PM, engineers and internal services). This was split out periodically.
Each period I would download the actuals and update the forecast in line with the contractors programme/ activity schedule. I would also update the internal forecast based on any known service relocations, agreed PM/ engineer allocation plus allowance for any additional allocations based on known additional input.
I would then report the revised EFC against the allocated project authority and budget to advise on the expected additional funds to be available for the second phase of the project.
As CE’s came about I would deduct this from the contingency level to keep track of the remaining available contingency and advise when additional contingency was required.
Difference between cost plan & cost estimate in early stages of a project
In the early stages the cost plan is just a single number and based on a unit rate e.g. per OLBI
whereas the estimate is the rough breakdown to achieve this unit rate
Why is effective change control important?
Assists with accurate monitoring of costs to ensure you stay within the project budget.
