Project Finance Flashcards
What is a cashflow S curve
Visual representation of cashflow.
Low at the start, goes up during and then low at the end
RICs guidance note
Cashflow forecast
Defined provisional sum
Benchmark data & defined scope
programme is bought (know the length of time itll take roughly)
Undefined provisional sum
Not defined scope
Not to exceed
NTE under instruction so cannot contractually be exceeded
What is in a cost report
Instructions to date
Expected instructions
Movement in cashflow
Valuations in line with programme
Overall budget - draw downs to date
How do you test financial stability
Past 3yrs turnover
Forecast turnover
Dan & broadsheet report
Balance sheet
what would you ask for in the PQQ
cashflow
budget
balance sheet
profit & loss from last 3yrs
how do you review a companies credit rating
the dun and bradshaw report
typical design contingency for a D&B contract
3%
what may affect cost of a project
pricing clarifications
provisional sums
contract amendments
valuation process
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
quantity surveyors role in valuations
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.
what does it mean to be ahead on cashflow
ahead on valuations- too much has been signed off. may lead to future valuations being less
what acts are relevant to payment
Housing Grants and construction regeneration act 1996
&
local Democracy, Economic Development and Construction Act 2009
what did the HGCR act include
fair payment for contractors- to stop clients not paying/ contractors not paying their subcontractors
what did the LDEDC act include
dispute resolution
when do you notify contractor of a pay less notice
no less than 5 days before the payment is due
What is cash flow
Is there an RICS guidance note on cash flow forecasting?
What is the difference between defined and undefined provisional sums?
Can a contractor claim for additional prelims when expending a defined provisional sum?
What is a Dun and Bradstreet report?
What is the purpose of cost reporting?
What is the payment process on one of your projects?
Example provisional sum?
How are provisional sums dealt with post-contract?
How are your fees calculated
How do you deal with consultant fee extensions
How do you review invoices
How can you assess a contractors programme against valuations.
You refer to valuations: explain the payment process of a unamended JCT.
interim val date
payment due date (+6days)
payment noticed issued (+5days)
final date for payment (+14 days from payment due date)
If a client fails to pay a contractor, what can the contractor do.
stop work
How is contingency calculated?
Can you list typical contractor preliminaries?
What type of preliminaries are there?
defined & undefined
What are the three options of inflation in a JCT?
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.
Can you name some of the pricing options for construction contracts?
lump sum
cost plus
fixed price
remeasurement
