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WS - APC Technical Competencies > Project Finance > Flashcards

Project Finance Flashcards

1
Q

How would you create a cashflow forecast?

A
  • Use the construction programme and contract sum analysis in order to populate the cashflow
  • I would split the works into the different packages as shown on the contract programme and include individual s-curves for each package
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2
Q

If your construction budget was £2.5m and proposed construction period was 25 weeks, would a forecast cashflow expenditure of £100,000 per week be realistic?

A
  • In reality this would not be very realistic as the cashflow expenditure is unlikely to have a flat or regular profile.
  • In reality the expenditure is much more likely to have an S-curve profile
  • At the beginning expenditure per week would be fairly low with site setup and enabling works undertaken
  • As the scheme progresses, items of higher value such as the M&E works are undertaken leading to higher expenditure per week.
  • as the scheme closes, minor finishes such as decoration and cleaning packages are undertaken resulting in a much lower expenditure per week.
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3
Q

What is the benefit of a cashflow forecast?

A
  • A cashflow forecast allows the employer to gain an understanding of the financial requirements over the duration of the project.
  • It can also act as a check against valuations
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4
Q

What is a financial report and what is it’s purpose?

A
  • A financial report is a document that is produced periodically that sets out the financial position of a project.
  • It’s purpose is to report against budgeted values and act as a working cost check on the project budget.
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5
Q

What would you include within a financial report?

A

I would typically look to include reference to:

  • Contract sum total.
  • The value of Instructed variations.
  • The value of potential future variations.
  • Provisional Sum Adjustments.
  • The anticipated final account total.
  • A cashflow forecast
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6
Q

What are variations?

A
  • Alterations or modifications to the design, quality or quantity of the contract works
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7
Q

Why might variations arise?

A
  1. Change to specification.
  2. Discrepancies between contract documents.
  3. Errors and omissions.
  4. Deficiencies in employer’s requirements
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8
Q

What form must instructions take?

A
  • It is best practice under the majority of contracts for instructions to be made in writing.
  • The QS is not usually authorised to make additions to the contract sum for instructions that are not in written form.
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9
Q

Are oral instructions considered valid?

A
  • The validity of oral instructions depends on whether the form of contract being used contains mechanisms for them to be valid.
  • In my opinion it is always best practice to follow up verbal instructions with written instructions as soon as possible.
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10
Q

Can the contractor object to a variation?

A

Some contracts allow the contractor to object to an instruction in special circumstances for example, In the JCT Standard Building Contract certain exceptions are:

  • Where the instruction might affect the contractor’s compliance with the CDM Regulations.
  • Where the instruction may infringe patent rights.
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11
Q

What can the CA/EA do if the contractor does not comply with an instruction?

A
  • This depends on the form of contract being used however under JCT Suites if the contractor does not follow an instruction, the CA/EA will be required to issue a ‘notice to comply’ to the contractor.
  • If the Contractor still fails to comply after 7 days, another party can be instructed to carry out the work and the contractor will be liable for any additional costs incurred.
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12
Q

What 3 methods are there of obtaining a cost for
variations under JCT forms of Contract?

A

This depends on the form of contract being used, under JCT SBC, quotations can be made by:

  1. Agreement between the employer and contractor.
  2. A schedule 2 quotation.
  3. Valuation by the QS under the valuation rules.
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13
Q

What are the variation valuation rules under JCT Forms of Contract?

A

There are three rules for measurable work:-

  1. If it is of a similar character, quantity and conditions as existing work, then the bill rates should be used.
  2. If it is of a similar character, but different quantity or conditions, the bill rates should be used as a basis but a fair allowance should be made to take account of the difference.
  3. If it is not of a similar character, fair rates and prices should be used.
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14
Q

What are ‘fair rates and prices’?

A
  • A rate based on actual costs.
  • A rate in line with current cost data.
  • A market rate.
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15
Q

What are dayworks?

A
  • The prime cost of all the materials, labour and plant used in carrying out the work
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16
Q

What document should the prime cost be calculated in accordance with?

A
  • ‘Definition of the Prime Cost of daywork carried out under Building Contracts’ published by the RICS.
17
Q

What information is necessary to be able to assess dayworks?

A
  • Timesheets
  • Names of the workmen.
  • Plant and materials used.
18
Q

Can the QS alter hours which he considers to be excessive on a dayworks sheet that is authorised by the architect?

A
  • No the hours recorded and signed off should be maintained within the variation.
19
Q

What would you do if the contractor submitted 10 dayworks sheets to you for payment?

A
  • I would verify that a relevant variation has occurred and is recorded on an Instruction.
  • I would check to ensure there is no other contractual method of valuing the variation.
  • Providing the Instruction is in place and no other mechanism for valuation is available I would seek verification of the hours and materials.
20
Q

If you and the contractor’s QS could not agree on something how would you resolve it?

A
  • I would discuss with the client to try and seek a resolution with the contractor.
  • The contractor could take the dispute to adjudication if necessary but all parties should try and resolve the matter by negotiation in the first instance.
21
Q

What is quantum meruit?

A
  • This translates to ** ‘what he deserves’ ** for example, fair and reasonable costs that have been incurred.
22
Q

What is quantum merit and Give an example of where it might be used

A

“What one has earned”
- If the employer and contractor reach a separate agreement on acceleration, the costs of this may be based on a ‘fair and reasonable’ basis.

23
Q

What is loss and or expense under JCT Forms of Contract?

A
  • L&E reimburses the contractor for direct loss and/or expense incurred in carrying out additional work or from an employer’s breach of contract.
24
Q

What are the procedures for claiming loss and expense under JCT Forms of Contract?

A
  • As soon as the regular progress of the work is affected, or the contractor becomes aware of any other matter that would cause them to incur loss and expense, they should notify the architect or QS in writing.
  • The contractor should submit any further information as requested by the client team
25
Q

What are the procedures for claiming loss and expense under JCT Forms of Contract?

A
  • The contractor should notify either the QS or architect in writing as soon as the regular progress of the work is affected,
  • The contractor should submit any further information as requested by the client team
26
Q

What are Relevant Matters under JCT Forms of Contract?

A
  • Events listed in the Contract that entitle the contractor to loss and/or expense
27
Q

What are the relevant matters?

A

There are 5 relevant matters:

  • Variations.
  • Instructions.
  • Suspension by the contractor for non-payment.
  • Any impediment or default by the employer.
28
Q

What is the key thing to remember when assessing loss and expense claims?

A
  • It should be the actual loss incurred by the contractor.
29
Q

What are the common heads of claim in loss and expense applications?

A
  • Prolongation.
  • Increasing of preliminaries.
  • Increases in labour or material costs
  • Loss of earnings.
30
Q

what is a change control procedure?

A
  • A process which clearly defines how changes are requested and approved.
31
Q

What are the common types of discrepancies between a contractor’s cash flow and yours?

A
  • Front loading - Contractor trying to claim more funds at the beginning of a project
  • re-sequencing of works
  • Variations and allowances for change control
  • Delays and loss and expense
  • project progressing slower than anticipated

Cashflow must be regularly updated and reviewed.

WS - APC Technical Competencies (10 decks)

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