Project Finance Flashcards
What is the purpose of post contract cost reporting?
- Client can see their financial position
- Ensuring scheme is monitored to see if it is due to be over or under budget
- Client can understand their rolling final account, which may assist them to make informed decisions
Name some effective post contract cost control mechanisms
- Interim valuations
- Change procedures
- Cost reports
- Cash flow forecasts
How would you create a cash flow before the contractor was on board?
- Look at the programme and cost plan
- Align cost components against programme to provide a cash flow for the works
How would you create a cash flow for a project where you had no programme data?
- I would at least have a duration as this would inform preliminaries
- I would use DHSS model to provide a smoothed “s” cash flow over the anticipated duration of the project
What are the different cash flows in construction?
- Contractor / Construction cash flow: Cash flow for construction and preliminaries only
- Employer cash flow: Cash flow for construction, prelims, professional fees, direct costs etc (wider project costs)
What are the benefits of forecasting costs? How does this help the Client?
- Ensures if there are any areas where there might be a cash shortage is addressed and rectified early
- Assists the client in preparing their accounts to ensure cash is available to pay contractor
- Can help them make informed decisions with regards to changes
- Can be compared to monthly valuations as a sense check
How can cash flows assist with determining site progression?
- Compare with monthly valuations to see if they are ahead or behind programme
- Helps address the issue and understand why the scheme is ahead or behind forecasted progress
If you detected the scheme showing an overspend, how would you advise your client?
- Could advise them to value engineer some remaining elements of the scheme
- If there are any change requests from client led changes, look at reviewing whether they are a necessity to the works
- Look at reducing the remaining scope to ensure the project can still be delivered
What if your Client said they could no longer afford the scheme?
- Consider the extent of not affording the scheme, i.e if they’re short in cost or funding has been pulled
- Look at value engineering or reducing the scope
- Possibly look at termination of the building contract
What are effective cost control mechanisms?
- Pre contract this can be OCE’s / CP’s / PTE’s / VE
- Post Contract this can be cost reporting / valuations / EW’s / compensation events / cash flow forecasting
How does post contract cost reporting help your client comprehend their rolling final account?
- can see what has been expended against the contract sum analysis / activity schedule / BOQ’s
- can see cost of approved and anticipated changes to see remaining contingencies
- if a Target Cost, can see where the contractor is likely to complete at, which can demonstrate whether there is any overspend and the % they may have to pay on top of that
What did you include in your cost report for 71/72 The Kingsway?
- Executive summary
- Commercial overview
- Any changes in the period
- Approved CE’s
- Anticipated and Disputed items (anticipated includes for EWN’s and NCE’s)
- Schedule of instructions
- Provisional sum adjustments
- Cash flow
How did you go about providing estimates for EWN’s and NCE’s?
- Used previous information submitted by the contractor to provide indicative cost
- Considered the works and possible resources required
- Provided estimate + fee %’s
For Oak House, why did you have a monthly target cost tracker which showed the latest cost plan against the returned packages?
- Cost Plan RIBA 3
- Client requested this for themselves as part of my cost report so they could reconcile the costs received from the contractor back to the cost plan
- Client wished to reconcile back as this was their latest budgetary sign off, so they wanted to see how their budget was tying to the progress / cost of works
Can you provide an example of a time, on The Kingsway, you have estimated the ramifications of design works?
- E Bike Charging Points
- Design works undertaken to incorporate electronic bike racks into the building
- I reviewed the electrical drawings and understood additional power would be required to the storage room
- I calculated the works to be undertaken, and any potential resource thickening the contractor would claim, added the fee % on and included this cost in the anticipated CE’s section
- Therefore, should the design be accepted by the Client, the cost of the whole works would be captured within the clients forecasted contingency expenditure