Project Finance

Question 1

What is a cashflow S curve

Answer 1

Visual representation of cashflow.
Low at the start, goes up during and then low at the end

Question 2

RICs guidance note

Answer 2

Cashflow forecast

Question 3

Defined provisional sum

Answer 3

Benchmark data & defined scope
programme is bought (know the length of time itll take roughly)

Question 4

Undefined provisional sum

Answer 4

Not defined scope

Question 5

Not to exceed

Answer 5

NTE under instruction so cannot contractually be exceeded

Question 6

What is in a cost report

Answer 6

Instructions to date
Expected instructions
Movement in cashflow
Valuations in line with programme
Overall budget - draw downs to date

Question 7

How do you test financial stability

Answer 7

Past 3yrs turnover
Forecast turnover
Dan & broadsheet report
Balance sheet

Question 8

what would you ask for in the PQQ

Answer 8

cashflow
budget
balance sheet
profit & loss from last 3yrs

Question 9

how do you review a companies credit rating

Answer 9

the dun and bradshaw report

Question 10

typical design contingency for a D&B contract

Answer 10

3%

Question 11

what may affect cost of a project

Answer 11

pricing clarifications
provisional sums
contract amendments

Question 12

valuation process

Answer 12

Interim Valuation Date is built into all JCT 2016 contracts
Interim Valuation Date is to be agreed by the parties in the Contract Particulars
Same day in each month, or the nearest business day in that month
contractor prepares application for this
QS attendees site and values work in totality
QS reviews the application & submits to EA/CA
EA/CA drafts payment certificate
application is approved
GC then submits invoice against the PO number
client pays invoice

Question 13

quantity surveyors role in valuations

Answer 13

The quantity surveyor’s function is to assess value as
distinct from cost, particularly with reference to prices of
certain items in the preliminaries section and temporary
works.
Interim valuation involves a revaluation of the whole work,
not the work done since the last interim certificate or
payment notice was issued.

Question 14

what does it mean to be ahead on cashflow

Answer 14

ahead on valuations- too much has been signed off. may lead to future valuations being less

Question 15

what acts are relevant to payment

Answer 15

Housing Grants and construction regeneration act 1996
&
local Democracy, Economic Development and Construction Act 2009

Question 16

what did the HGCR act include

Answer 16

fair payment for contractors- to stop clients not paying/ contractors not paying their subcontractors

Question 17

what did the LDEDC act include

Answer 17

dispute resolution

Question 18

when do you notify contractor of a pay less notice

Answer 18

no less than 5 days before the payment is due

Question 19

What is cash flow

Question 20

Is there an RICS guidance note on cash flow forecasting?

Question 21

What is the difference between defined and undefined provisional sums?

Question 22

Can a contractor claim for additional prelims when expending a defined provisional sum?

Question 23

What is a Dun and Bradstreet report?

Question 24

What is the purpose of cost reporting?

Question 25

What is the payment process on one of your projects?

Question 26

Example provisional sum?

Question 27

How are provisional sums dealt with post-contract?

Answer 27

Instructed with actual cost which forms part of contract sum

Question 28

How are your fees calculated

Question 29

How do you deal with consultant fee extensions

Question 30

How do you review invoices

Question 31

How can you assess a contractors programme against valuations.

Answer 31

Site progress Critical path items

Question 32

You refer to valuations: explain the payment process of a unamended JCT. 

Answer 32

interim val date payment due date (+6days) payment noticed issued (+5days) final date for payment (+14 days from payment due date)

Question 33

If a client fails to pay a contractor, what can the contractor do. 

Answer 33

stop work

Question 34

How is contingency calculated?

Answer 34

Percentage of contract sum- typically between 5-15%. Bloomberg is 10%, BDO is lower due to budget constraints

Question 35

Can you list typical contractor preliminaries?

Answer 35

Access Permits: Obtaining necessary permits for access to the site. Site Accommodations and Welfare Facilities: Setting up temporary offices, welfare facilities (e.g., toilets, break rooms), and site security. 2. Site Running Costs: Utilities: Costs for water, electricity, heating, and other ongoing site requirements. Site Waste Clearance: Managing and disposing of waste materials.

Question 36

What type of prov sums are there?

Answer 36

defined & undefined

Question 37

What are the three options of inflation in a JCT?

Answer 37

Fluctuations Option A (No Fluctuations) Description: This option assumes a fixed price contract, meaning the contractor absorbs all risks associated with inflation or cost increases during the project. Key Features: The contract price remains unchanged regardless of fluctuations in market prices for materials, labor, or other inputs. Suitable for short-term projects or when inflationary risks are considered minimal. The contractor must account for potential inflation in their tender price to mitigate risks. Implications: The employer is protected from inflationary cost increases. The contractor bears the risk, which may result in higher bid prices to account for uncertainty. Fluctuations Option B (Consumer Price Adjustment) Description: This option allows for adjustments to the contract price based on changes in predefined indices, such as the Consumer Price Index (CPI) or other agreed-upon indices. Key Features: Adjustments are made only for specific cost changes, such as labor and material costs, using agreed inflation indices. More predictable and transparent, as increases or decreases are tied to published indices. Often used in projects with longer durations where inflationary risk is significant but manageable. Implications: The contractor shares inflationary risk with the employer, as the contract price adjusts to reflect real-world changes. Requires careful monitoring of indices and agreement on how adjustments are calculated. Fluctuations Option C (Formula Adjustment) Description: This option allows for comprehensive adjustment of the contract price based on actual changes in the cost of labor, materials, and other inputs. The adjustments are typically calculated using a formula-based approach. Key Features: The formula reflects detailed cost categories (e.g., wages, fuel, materials, etc.) and adjusts prices accordingly. Offers a detailed and fair mechanism for addressing inflationary changes in longer-term or high-value projects. Requires agreement on the formula to be used, often based on industry standards or government-published indices. Implications: Provides the contractor with protection against inflation, as costs are adjusted to reflect actual increases. The employer bears more risk, as they must accommodate these price adjustments. Requires detailed record-keeping and administrative effort to track cost changes.

Question 38

Can you name some of the pricing options for construction contracts?

Answer 38

lump sum cost plus fixed price remeasurement