Project Finance

Question 1

At what stage do you produce a feasibility estimate?

Answer 1

RIBA Stage 1

Question 2

At what stage do you produce a Cost plan?

Answer 2

RIBA stage 2, 3 & 4

Question 3

What’s the difference between estimate and cost plan?

Answer 3

Cost Estimate
- RIBA stage 1
-Limited info based on area rates
- Budget setting purposes

Cost Plan
- RIBA stage 2, 3 & 4
-Concept to full design info
-Assesses design development

Question 4

Why is an estimate beneficial to a client?

Answer 4

It allows the client to make financial decisions on budget setting purposes and may also affect design changes.

Question 5

Why is a cost plan beneficial to a client?

Answer 5

Allows the client to see design development and allows them to make financial designs based on the impact of design against budget.

Question 6

What is a cost report?

Answer 6

A Cost report is a monthly report which demonstrates the known and anticipated cost changes against the client budget.

Question 7

What elements should be included within a cost report?

Answer 7

-CSA
-Agreed change
-Anticipated change
-Fixed costs such as professional fees and direct work costs
-Cash Flow Forecast
-Final account forecast

Question 8

Why is a cost report important to a client?

Answer 8

The purpose of cost reporting is to inform the client in a construction project of the likely outturn cost of the construction project. The forecast of outturn costs may
be expressed as a variance against a budget amount, or expressed in absolute terms.

Question 9

What shape is a cashflow and why is this the case?

Answer 9

• S Shape
  -The least amount of works take place at the start and end of the project.
• The majority of work packages take place in the middle.
• Less works at the start and end mean less payment compared to the middle.

Question 10

If a contractors application was more than the cash flow forecast what could this mean?

Answer 10

-Ahead of Programme
-Overclaiming

Question 11

If a contractors application was less than the cash flow forecast what could this mean?

Answer 11

-Behind on Programme

Question 12

How did you show value for money when assessing CEs?

Answer 12

-Benchmark rates against legacy schemes
-Check if it is a valid CE in the contract
-Request supplier quotes
- Check if it is Arithmetical correct
-Query contract on any rates or discrepancies

Question 13

CE TIMELINE

Answer 13

Contractor notifies within 8 weeks of knowing about the issue and submits a CE.

1 Week period for PM to submit a PMI or the contractor to submit a quote.

PM accepts or in 2 weeks the CE is automatically accepted.

Question 14

Do you know any recent legislation changes?

Answer 14

Building safety act 2022

Question 15

What did the Building safety act 2022 introduce and what is the affect on building projects?

Answer 15

Fire safety legislation
- increase cost for certain compliant materials
-Increased planning within design stages
- Harder to obtain insurances and greater risk premium
- Changes to design regulations particularly with high rise residential dwellings

Question 16

How do you quantify risk within an estimate?

Answer 16

Shouldn’t be a standard percentage, risks should be assessed on an individual basis.

Question 17

How are provisional sums used under the NEC contract?

Answer 17

Prov sums aren’t used with the NEC contract, if items cannot be precisely defined, they should not be included

Question 18

How do you manage contractual change under the NEC contract

Answer 18

-CE Mechanism
-19
-i.e cant get access to site or client change

Question 19

What would you expect to see on a contractors application for payment?

Answer 19

• Works packages
• Preliminaries
• Contract Instructions
• Materials on site
• Professional Fees
• Provisional Sum expenditure

Question 20

How do you deal with defective work in a valuation?

Answer 20

Monies associated to defective and outstanding work must be excluded from the valuation

Question 21

What is risk?

Answer 21

The likelihood of an event or failure of it occurring and its consequences or impact (NRM1, RICS, 2012

Question 22

How did you go about quantifying risks? Unknown risks?

Answer 22

Use a risk formula - traffic light risk schedule

Question 23

What is a final account?

Answer 23

The final account is the conclusion of the contract sum including all necessary adjustments and signifies the agreed amount that the employer will pay the contractor.