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
For your role at TfL cost manager support, why would you advise your client to offset costs in alternative accounts?
- Some costs were mistakenly raised against the cost code and needed rectifying
- Each month I undertook due diligence by reviewing the works that have been done to the expenditure in the financial system
- If costs were incorrectly assigned, these could be journalled to the correct place to ensure my client could see their realistic expenditure for a project
