Project Finance Flashcards
What would be included in a cost report / financial statement
Exec Summary
Contract sum
Variations
Valuations
Cashflow and s curve
Risk allowances/Contingency
Proposed final account
You have mentioned interim payments, can you please explain the timescales for payments with regard JCT (standard and D&B)
No less than 7 days before due date- MC issue valuation (D&B - Val is up to due date)
0 days - Due date
+5 days - CA Issue payment cert
+ 9 days - Client issue a pay less notice
+14 days - Final date for payment
What is a provisional sum
- An allowance included for:
- Not sufficiently defined, designed or detailed to allow accurate costing
- Work that employer may / may not want carried out
What is the importance of a cash flow forecast?
Plan expenditure
Forecast final account
Track progress against cashflow
How would you manage the costs on a risk register as a project progresses?
Release contingency according to cashflow as risks are realised / not realised
What is the difference between a defined provisional sum and undefined provisional sum
Defined must be allowed for in the programme and prelims
What is the purpose of providing clients with financial statements?
- Provide financial overview for client
- Inform likely outturn cost of project
- Understand potential savings / additional funds
What are the JCT Standard Form ‘Valuation Rules’?
Contract Rates: where work is of similar ‘character’ to work in the original Contract Documents then the valuation of the variation shall be consistent with rates, prices or amounts of work in the proceed document.
Fair Rates and Prices: Where work is not of a similar ‘character’ then it should be valued at ‘fair rates and prices’.
Dayworks: Method of valuing work which cannot properly be valued by measurement.
Contractor’s quotations
How are prelims dealt with in valuations
Broken down into fixed costs and time related costs and assessed as such rather than a %.
How are prov sums dealt with in valuations
If the works have been completed that are associated with the prov sum and the works formally instructed they can be included.
Considerations when advising client on Cashflow
- Holidays (eg winter / xmas)
- Retention (end of defect period)
- Certification period
- Payment period
- Sectional completion / Partial possession (Retention)
- Risk
- Prov sums
Reasons for variance in Cashflow
Lower
- Site conditions
- Adverse weather
- Programme issues
- Various delays
Higher
- Front end loading
- Variations
- Ahead of programme
- Distressed contractor
- Cashflow not accurate
What would you include in a cashflow in addition to the direct cost of the works?
Retention
Variations
Prov Sums
VAT (maybe but complicated)
Materials on site
What would you omit in a cashflow
Anything as long as noted to the client
VAT
Materials off site
Effect of Loss and Expense Claims on Cashflow
- Update for best and worse case LOE additions
- May include EoT if necessary
- Update for when claim will be paid
Effect of Liquidated Damages on Cashflow
- Dont include until agreed with contractor
- Doesnt act as saving as it is genuine loss client has received - balances out
Effect of VAT on Cashflow
Usually not included at this is subject to the clients circumstances and requires outside advise.
Effect of procurement route on cashflow
Traditional
- Separate construction costs from design fees and risk allowances
Design and Build
- Include element of design fees and risk allowance into construction costs
Cost Reimbursable/Target Costs
- Not lump sum so cashflow forecast would initially be based on target cost
- Cashflow must be updated regularly when actual costs are known from pain/gain.
Construction Management (Packaged works)
- Follows similar to traditional but with multiple cashflows for each package
- Payment terms may be different for each package
- Payment dates will differ
- Construction manager fee to be considered
Can you explain the importance of a contractor noting they are behind cashflow?
Notes that they are behind schedule or the cashflow requires review
“Contractor gives you a cash flow forecast and you notice they are behind, what do you advise your client?”
That they might be behind programme or back loading.
If you had a contract sum and a programme from a contractor, how would you produce a cash flow forecast?
Assign contract sum against the programme tasks, produce cost incurred per month.
Why do you think a cash flow forms an S’Curve?
Enabling works cost little then bigger packages such as steel and superstructure, costs then reduce towards end for finishes and fit out.
Difference between Cost and price
Cost - cost of labour works and plant
Price - What the client will pay
Loss and Expense - Is OH+P included
Only entitled to claim for loss of profit. Cant be seen to loss.
What effects outturn of construction costs
Fixed cost - No impact
Provisional Sums - Costs updated (+/-) when defined and undefined prov sums are firmed up
Provisional Quantities - Where quantities are firmed up
Prime cost sums - Where specification is firmed up
Daywork allowances - When allowances for labour, plant and materials are firmed up
Variations - Instructions, anticipated instructions, loss and expense, risk allowances (contingency) and fluctuations.
How is VAT dealt with in cost reporting
Always excluded
What is change control procedure JCT
- Contractor notified of change
- Contractor issues variation
- QS to review
- 7 days to notify if not agreeable, if is then CA instructs
What are the JCT timescales for submitting a Final Account
- Contractor should submit by maximum 6 month
- Final account should be agreed in 3 months following issue
What should be issued with final accounts
Substantiation to variation figures
Sub contractor quotes
Daywork sheets
Loss and expense claims with build up
Build up of fluctuations
How are provisional sums expended
- CA issues instruction
- Prov sum omitted and replaced with actual cost
How are provisional sums dealt with in final account
- CA should have issued instruction to omit all prov sums
- Instruction to show add and omit
How does NEC deal with provisional sums
- Unamended NEC doesnt provide use of prov sums
- NEC approach - if unclear and price cant be provided, item excluded until defined
Can contractor claim additional prelims or EOTwhen firming provisional sums
No, if defined it should have been allowed for in programme and prelims
Contractor has made large and in your opinion unrealistic claim for L&E, how would you deal with it
- Highlight concern with figure submitted
- Assume CA has agreed claim is valid, carry out due diligence checks and assess
- Update client regularly until resolved
