Project Finance Flashcards
What is financial control?
It is the proactive management of costs within a project. Monitoring cost drivers and working to ensure they are delivering value
What are typical KPIs?
- Environmental: Carbon, recycled materials, locally sourced
- Level of monthly spend: versus cashflow, instructions raised
- Level of cost certainty: firm vs provisional figures
What is a defined provisional sum?
An item that is not yet fully defined, but there is enough information to provide a rough cost within the CSA, include for the works within the programme, and include for the necessary preliminaries
What is an undefined provisional sum?
An item with insufficient information to allow for the works within the programme, nor to allow for preliminaries
What is a prime cost?
Prime costs are for items where the exact specification of product is not yet decided, but an allowance is made for supply and install
What is a star rate?
Star rates are where you use a contract rates and make an amendment to take into account the different context in which the works are taking place. e.g. work is now at high level
How can you create a cash flow forecast?
- Using a simple S curve formula
- Looking at the different work packages and their values, and estimating when they will be included within the valuation.
What are the benefits of a cash flow forecast?
- It provides the client with guidance around their anticipated monthly spend
- When compared to the monthly valuations, it can be an indication of potential delays
What is typically included within a cost report?
- The contract sum
- Adjustment to provisional/prime costs
- Any instructions/anticipated instructions
- Any agreed/anticipated claims
- The estimated final account position
- A running total of value certified to date
What is the purpose of a cost report?
- To give the client an update on the financial health of the project
- To give the client an understanding of why cost changes were occurring
- To report against post-contract changes
What is the JCT procedure for verbal instructions?
If the CA/EA instructs the contractor to do works via a verbal instruction, then:
- The contractor should go back in writing outlining the terms of said instruction
- If the CA/EA doesn’t reply within 7 days, it is deemed to be accepted
- If the CA/EA responds rejecting/amending the contractor’s perspective then the instruction is paused until all is agreed
When can a contractor reasonably object to a variation?
- If it may affect their ability to comply with CDM regulations
- When the instruction might affect the efficacy of the design of the CDP portion
- If it infringes on patent rights
- When the client instructs a named specialist and the contractor is unable to do so
What happens if the contractor doesn’t comply with an instruction?
- The CA can raise a notice of non compliance
- If they still don’t comply, they may instruct another party to undertake the works and charge the contractor for any additional costs incurred
What are the 3 methods to obtain a cost for a variation under JCT?
- An agreement between the contractor and client
- A schedule 2 quotation
- An valuation by the QS
What are the time scales under a schedule 2 quotation?
When providing an instruction, the CA may request a schedule 2 quotation/a variation quotation
- The contractor has 7 days to request further information to enable the pricing of the change
- The contractor then has to submit their quotation within 21 days of:
§ The instruction being raised
§ Further requested information being issued
- The quotation must remain open for no less than 7 days
