Project Finance

Question 1

What is a risk?

Answer 1

An uncertain event or circumstance that, if it occurs, will affect the outcome of a programme/project.

Question 2

What are the stages in a risk assessment?

Answer 2

1. Risk identification
2. Risk analysis and evaluation
3. Risk control (implementing control measures)
4. Documentation and record-keeping
5. Reviewing and updating the assessment if necessary

Question 3

What would you find in a risk register?

Answer 3

• Identified Risk
• Risk Owner
• Mitigations in Place
• Anticipated cost impact/ risk allowance
• Ratings on the risks:
  
  • Impact
  • Likelihood of occuring

Question 4

What is cashflow?

Answer 4

A project level cashflow, will show the money being earned by the contractor this will be the inflow of cash, but then you have the payments the contractor will need to pay the supply chain, this will be the outflow of cash.

Question 5

Why is cashflow so important in the construction industry?

Answer 5

Enables the monitoring of suppliers performance against the programme.

Payment is usually made in arrears so its important to have the right cash to pay liabilities.

Question 6

What is a funding drawdown schedule?

Answer 6

A drawdown schedule for construction is a financial plan that outlines when project funds will be requested and dispersed throughout the construction project. It determines when payments will be made to the contractor based on milestones or completed phases of work.

Question 7

Why are cashflow forecasts required?

Answer 7

To ensure the Client/Contractor has funds in place to pay the supply chain within the required time frames.

Allows funding draw down schedules to be agreed with the bank.

Question 8

What is the Final Account?

Answer 8

The final account is the conclusion of the contract sum
(including all necessary adjustments) and signifies the
agreed amount that the employer will pay the contractor.

Question 9

How does NEC deal with Final Accounts?

Answer 9

Final Assessment made within 4 weeks from the issuing of the Defects Certificate.

Question 10

How do you calculate cashflow forecasts on internally delivered projects?

Answer 10

Working closely with the project supervisor and delivery team.

• Orignal Cost Estimate
• Work Plan
• Internal management staff cost

Question 11

What was the historical over payment you identified and how did you manage this?

Answer 11

One of Network Rail’s material suppliers for the Pacakge C project had invoiced twice.

A credit was obtained and the Client was informed.

Question 12

What was the contingency tracking process you developed?

Answer 12

Monitor cost of each shift against the cost estimate, clearly highlighting any under or over spend. This was clearly logged with a commentary on any money add or drawn from contingency.

Question 13

What inflation allowance did you make on the new CP7 projects and how was this calculated?

Answer 13

I utilised the Consumer Price Index and calculated the % adjustment required to the midpoint of construction and then adjusted the overall estimate.

Question 14

What was the risk allowance on the new CP7 projects and how was it calculated?

Answer 14

Risk identified was lost shift due to RRV failure or last minute access cancelation.

Allowance made for the cost of 2 extra shifts on each project

Cost per shift:

Tommy’s Lane - £25K

Headspans - £13K

Balance Weights - £15K

Question 15

What are the different options for handling risk?

Answer 15

• Avoid
• Reduce
• Transfer
• Share
• Retain