Project Finance Flashcards
What are the contents of a Cost Report?
“a. Executive Summary
b. Cost Summary
c. Cash-flow
d. Change Orders approved, forecast and potential/risk
e. Risk Analysis
f. Forecast Final Account
g. Invoices tracker and submissions.”
What is a Cost Report
A document produced periodically that sets out the financial position of a project.
What is the purpose of producing a cost report?
“To monitor and manage cost throughout the project.
To inform the client on actual project cost against the budget.”
Why is it important for the client to know the anticipated out-turn cost?
“It gives them the best possible basis on which to base future project decisions.
Funding purposes”
What is the budget?
The budget is usually ‘cost of work’ both under & not under construction contract.
If the anticipated final account is over-budget, what could you consider doing?
“Review of any open allowances.
Reduce spec of elements of remaining work”
How do you agree a Change Order?
“A modification to the quantity or quality of the project scope.
- Negotiation what is fair and reasonable.
- Material and Labor breakdown
- Substantiation
- Whether means and methods”
What are some reasons for change orders
”- Client change
- Design Development
- Design Error
- Field Condition”
What is means and methods?
Means and methods of construction refer to the techniques, procedures, and materials used during the construction process and to achieve specific outcomes.
Are project cashflows only used between clients and contractors?
No, contractor and subcontractor too.
What can an organisational cashflow be used for?
It can be used to assess whether a company will be able to adequately cope with the works being considered.
Would you include LADs in a cost report?
Yes, but I would seek the client’s instruction on this.
What is the purpose of producing a cashflow for a client?
”- It informs them what and when their monetary commitments are
- This is important for them in order to secure the correct funding
- Checking progress and identifying if we are behind Schedule. i.e. the contractor’s payment are behind the forecast.”
What types of cashflow are there?
“1. Turnover
2. Cost”
What do you do after issuing a cost report?
Meet the client in person to review it.
What types of information should you seek from the brief before producing a cashflow forecast?
“WWWP
- Who will use the cashflow forecast - contractor or client?
- Whole development or just for the construction contract?
- Which date should be used i.e requisition date, invoice date, etc
- Payments - Should it display cumulative payments, monthly payments or both?”
What is the Cost Manager expected to do in terms of cashflow forecasting?
“BIUM
- Take a brief from the client to understand their requirements for a cashflow forecast
- Produce initial cashflow at feasibility stage
- Update the forecast throughout design, RFP and construction period
- Monitor actual payments made against the forecast and explain the discrepancies”
Why is it important to consider the form of contract when producing a cashflow forecast?
Because different forms of contract have different payment timescales between application and payment.
What are important points when reviewing an organisational cashflow?
”- Overdraft level
- Frequency of overdraft use
- Potential effect of bank removing overdraft
- Potential effect of company losing 1 or more key clients”
What other considerations should be made when producing a cashflow forecast?
Vacation / Public holidays / time of the year.
What are the different ways of producing a cashflow forecast?
“Pre-contract I would use an s-curve formula.
Once a contractor is appointed, I would use the contractor’s Schedule and pricing document. I would also seek input from the contractor.”
Should risk be included in the cashflow forecast?
Yes, to make allowance for any likely change orders.
What types of cost are carried in the cash flow
Hard Cost, Soft Cost, FF&E, audio/visual (if applicable)
Why might a contractor re-sequence works?
”- Late procurement of sub-contractors
- Recover time due to slow progress.
- Site conditions”
The contractor’s payment application is higher than the forecast cashflow, why could this be? (list some)
”- Front loading
- Ahead of Schedule
- Change Orders
- Works have been accelerated.”
The contractor’s payment application is lower than the forecast cashflow, why could this be? (list some)
”- Poor site conditions
- Adverse weather
- Materials stored off-site not claimed
- Slower site progress.
- Change Orders”
What was included in the Final Account that you prepared?
“CACPT
Contract Sum
Allowances
Change Orders
Total Value
Previously Paid”
How do you value a Provisional Sum (allowance)?
“a. Defined - Discribed in sufficient detail that a GC should have made an allowance for them
b. Undefined - less well described and allowance made by contractor for schedule and pricing.”
How to avoid claims ?
- Balance risk
- Sufficient design & specs.
- Correct procurement route.”
What is loss and expense ?
A contractors claim for loss and expense at the same time as an extension of time. It is the money required for delay and disruption, inefficient working and/or employing more resources - UK
How do you establish/design change control procedure?
“PIP CEC RA
- Project procurement route and impact during design and construction
- Identify key decision makers to approve changes
- (Client’s) Priorities from monitoring change?
- Change control procedure process and forms
- Evaluation and measuring change
- Costs to include in evaluating - Hard, Soft, FF&E
- Responsibility and communication matrices for raising changes
- Applicable contract mechanisms.”
What measures can be taken to effectively control costs during the construction phase of a project?
”- Regular meetings with contractor
- Regular Cost reporting
- Proactive risk & contingency management
- Robust change control.
- Allowance tracking.”
What is Cost Control and Procedures you undertake to cost control?
“Process of controlling costs through the duration of the project. includes procedures to:
1) Detect change variances between budgeted and actual cost.
2) Detect cause of change orders.
3) Corrective measure to re-align actual cost with budget.”
What are the cost control tools?
“Pre contract - Estimates - ROM, SD, DD, CD
Post Contract - Cost Report, Risk Management/register, Allowance Tracker, Change Order Log, Final Account.”
What are Finance Control tools?
Financial Statements - Cashflow forecast, budget, etc.
What is Value Engineering?
“It is a structured process that aims to maximise value of elements without detriment to function or quality.
Why: VE Right delivery strategy for performance/function.
When: VE preferable at outset put usually reactive
Report: VE report to project technical team”
What is Value Management ?
“Exploring how value could be provided for a project at a strategic level by helping to develop the right project brief.
Why: VM To for strategic decisions (right project for objectives).
When: VM Proactive at earliest to maximize value
Report: VM report to Client/stakeholders”
Value Engineering techniques
“FFFW
- Function analysis i.e. value tree and mind map
- FAST diagram
- Function performance specification
- Weighing and evaluation”
VE report contents
“1. Executive summary
2. Shortlist options considered
3. Value assessment of options
4. Conclusion and recommendation
5. Appendices”
“What are the different types of Listed buildings?
“· There are three categories (USA):
o Grade I – Buildings of exceptional importance
o Grade II – Buildings of more than special interest
o Grade III - Buildings are non-statutory buildings of local interest”
