Project Finance Flashcards
How would you create a Cashflow forecast
I would gather the CSA and the programme duration and insert the data into an S-curve Formula
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?
- This is not a realistic cashflow forecast as this would be based on a flat rate expenditure for the duration of the project.
- Typically at the beginning of the project during the enabling works stage and you only have one or two sub-contractors onsite expenditure is relatively low and as progress increases more trades are onsite therefore once the superstructure shell is compete internal M&E and internal finishes will be underway where the bulk of the cost is so expenditure will be much higher.
What is the benefit of a cashflow forecast
A cashflow forecast allows the client to forecast budget expenditure throughout the project. Time to secure future funds.
It can also be guide on contractor valuations which can be used as a guidance on progress.
What is a financial report and what is its purpose
A financial report is a structured document based on client requirements and issued periodically.
it tracks any adjustments to the Contract Sum Analysis.
What would you include within a financial report
- Executive summary (Anticipated Final Account)
- Contract instructions
- Anticipated variations
- Provisional Sum tracker
- EOT adjustments
- Other
- Cashflow forecast
What are Variations
Variations are adjustments to the contract scope such as design, quality or quantity
Why might variations arise
Variations might arise, because a client wants to make a change to their project that will increase value.
- Discrepancies between contract documents
- change in specification
- Deficiencies in Employers requirements
- Errors and Omissions
What form must instructions take
Contract administrators instruction. Under most contracts it is best practice for instructions to be made in writing.
Does contracts allow for verbal instructions
It is best practice to always provide a written instruction.
Yes the JCT has provisions for verbal instructions. The contractor must follow up with a written notice within 7 days. then the CA should notify the contractors notice within 7 days.
The new 2024 suite of contract states contract instructions should be given in writing when practically possible.
Can the contractor object to a variation
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 contractors compliance with the CDM Regulations
- Where the instruction may infringe patent rights
what can the CA/EA do if the contractor does not comply with an instruction
- Depends on the form of contract being used. 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.
What 3 methods are there of obtaining a cost for variations under JCT forms of contract
Under JCT SBC can be made by:
- Agreement between employer and contractor
- A schedule 2 quotation
- Valuation Rules
- Contract Rates
- Market rates
- Dayworks
what are the variations valuation rules under JCT forms of contract
Valuation Rules
- Contract Rates if works are similar character, quantity, conditions
- Market rates/ fair and reasonable allowance, if similar character, but different quantity and conditions
- Daywork
What are fair and reasonable rates and prices
- A market rate
- A rate based on actual costs
what are dayworks
- The prime cost for all the materials, labour and plant used to carry out the works
What is a star rate
- a new rate, for example a change of specification of concrete to rapid set, fast setting concrete
What document should the prime cost be calculated in accordance with
‘Definition of the prime cost of day work carried out under building contracts’ published by the RICS
What Information is necessary to be able to assess dayworks
- Time sheets
- Names if the workmen
- plant and materials used
Can the QS alter hours which he considers to be excessive on a dayworks sheet that is authorised by the architect
- No the hours recorded and signed off should be maintained within the variation
What would you do id the contractor submitted 10 dayworks sheets to you for payment
- 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
What is an example of dayworks under the valuation rules
unforeseen circumstances in ground conditions i.e unaccounted for rock layers or utilities
If you and the contractors QS could not agree on something how would you resolve it
- 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
What is quantum meruit
- This translates to ‘what he deserves’ for example, fair and reasonable costs that have been incurred.
What is quantum merit and give an example of where it might be used
- If the employer and contractor reach a separate agreement on acceleration, the costs of this may be based on a ‘fair and reasonable’ basis
