Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

APC Project Management Revision Pack > Project Finance > Flashcards

Project Finance Flashcards

1
Q

What is a Cost Plan?

A

Cost planning is producing an estimate based of historic data, such as internal benchmark data.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who prepares a cost plan?

A

The Quantity Surveyor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What types of cost plan are there?

A

Elemental Cost Plan.
• Initial Cost appraisal.
• Approximate quantities cost plan.
• Pre-tender estimate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is an initial cost plan?

A

A pre-estimate of the various cost options available at feasibility stage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is a feasibility study?

A

Preliminary studies undertaken in the early stages of a project, analysing whether a project is viable, and what options there are relating to construction methods etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is an Elemental Cost plan?

A

A cost estimate prepared at the project brief, which is developed throughout the detailed design.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How does an Elemental Cost Plan evolve?

A

Initially each item is a percentage of the overall figure, or budget. This gets more detailed as the design develops, through measuring drawings, using sub-contactor prices etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is an approximate quantities cost plan?

A

A cost estimate carried out at detailed design stage, based of approximate quantities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a pre-tender estimate?

A

Prepared alongside the tender documents, they are an estimate of the total build cost at tender stage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the Contract Sum?

A

The agreed value for carrying out the works in accordance with the contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is an Estimate?

A

The likely cost of something based of the limited information provided at the time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What can you use to value a estimate?

A
  • Use Build Construction Information Service, value a building on a price per square foot.
  • Can use historical data, i.e. for care homes we work on, we can provide budget prices based on a price per bed etc.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What information would you require to potentially establish a budget?

A
  • Size or number of beds etc.

* Location

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a Cash Flow Forecast?

A

A prediction of the incomings and outgoings of cash with in a business/project.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the two types of Cash Flow Forecast?

A
  • Organisational Cash Flow.

* Project Cash Flow.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is Organisational Cash Flow?

A
  • Used for planning and analysing company health.

* It is used to predict the incomings and outgoings of cash within a business over a specific period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is Project Cash Flow?

A
  • Used for determining he amounts of cash that will be paid to a contractor, and the time they will be paid.
  • Can be used to monitor performance by comparing value of interim valuations against cash flow forecasts.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What other methods of Cash Flow Forecast do you know?

A

The ‘S’ Curve Method.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the ‘S’ Curve method?

A

• A general principle, that a typical construction will follow:
o Low initial start costs.
o High costs in the middle as the majority of the works is undertaken.
o Low finish costs from demobilisation etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What would you do if you received a valuation from a Contractor that was massively over the Cash Flow Forecast value?

A
  • Check contractors progress on site, to see if they are ahead of programme.
  • See if they have re-sequenced the works.
  • It may mean that the contractor is in distress.
  • It might mean that the Cash Flow Forecast is incorrect.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What would you do if you received a valuation from a Contractor that was massively less than the Cash Flow Forecast Value?

A
  • Check progress on site, they might have re-sequenced the works.
  • Might mean that the contractor is behind programme.
  • It might mean that the Cash Flow Forecast is incorrect.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a Works Breakdown Structure?

A
  • It organises the project into manageable sections, comparing budget against the actual value of the works in a hierarchy structure.
  • From this you are able to analyse each aspect of a project for its profitability.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are the Four Stages of a risk assessment?

A
  1. Identify the risk.
  2. Evaluate the risk in terms of severity and impact.
  3. Produce a response to the risk, i.e. take measures to mitigate it.
  4. Report back how successful the mitigation method was for future application.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is Value Engineering?

A

• An approach undertaken to try and deliver the employers requirements at minimum cost, without compromising the quality or function required.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is Value Management?

A

• A method of identifying the most important aspects of a project from the client’s perspective, and ensuring that they are achieved to the required standard. Any left over budget can be used on the less important aspects.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is included within preliminaries?

A
  • Supervisions.
  • Welfare.
  • Mobilisation/demobilisations.
  • Temporary Service
  • Site Offices.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is considered to be good commercial management?

A
  • Regular reporting.
  • Regular Cash Flow Forecasting to understand position.
  • Forecast Final Accounts.
  • Valuing and agreeing variations early.
  • Clear accurate valuations.
28
Q

What would you say the difference between a Commercial Manager and a Quantity Surveyor is?

A
  • A Commercial Manager is there to maximise profits.

* A Quantity Surveyor is there to run the financial aspect of a project efficiently.

29
Q

What is a cost?

A

Any outlay for a building project.

30
Q

What is value?

A

Money in and assets.

31
Q

What factors affect the cost of a building?

A
  • Location.
  • Time of year.
  • Shape.
  • Materials.
  • Site conditions.
  • Ground Conditions.
  • Access to services.
  • Access to site.
32
Q

As a Project Manager how do you manage the costs from start to finish?

A

Pre-Contract
1. Pre-Contract I worked in collaboration with the QS team, through oversight and support in the production of the Order of Cost estimate which used benchmark rates to produce estimated M2 unit rates.
2. As the design progressed through to concept design, I would support the QS to produce the first stage cost plan through the second stage cost report at developed design.
3. This then led into the production of the PTE which is a key responsibility of mine to support the QS to make sure that all elements have been accounted for that might be unknown to the QS.
4. I would then support the QS review the tender return in relation to our PTE to identify any areas of high variance.
Post-Contract
1. Again, supporting the QS team, I would regular review the progress on site and attend the on site valuations with the Project and Contractor QS
2. This would be tracked on a monthly basis in the Cost Report that was issued to the Client.

33
Q

What was contained in the cost report?

A
  • List of instructed Variations
  • List of Variations pending Client Approval
  • Value of works completed against plan
  • Decisions required by the Client
34
Q

What is a provisional sum?

A

Sum of money included in the contract for work by a statutory authority, work that cannot be fully defined at time of tender or work that it is not sure is required

35
Q

What are the risks associated with provisional sums?

A

That the actual cost and time exceeds that allowed for in the provisional sum because the nature of the item changes between tender and instruction

36
Q

How are provisional sums dealt with in the final account?

A

The provisional sums included in the contract are deducted and the actual amount substituted

37
Q

What stage of a project uses a cost plan?

A

Pre-Contract Stage (Concept through to Developed)

38
Q

What is typically excluded from a cost plan?

A
  • VAT
  • Inflation
  • Tenant Contributions
39
Q

How do you check that prelims are fair and reasonable?

A

Length of the Contract

Sectional Completion

40
Q

What is contingency?

A

A percentage of contract sum value used for unknowns (Typically 10-15% but can vary from project to project)

41
Q

Why are provisional sums used?

A

If there is an unknown in the design or part of design isnt finihsed

42
Q

What would you include in a cost report?

A
  • Contract sum
  • Instructed variations
  • Potential future variations as advanced warnings
  • Claims
  • Anticipated final account total
  • Total of certified payments
43
Q

What is the purpose of a cost report?

A
  • To report against budgeted values and act as a working cost check on the project budget.
  • To give the Client an understanding of any savings or additional monies required.
  • To report on contract progress against pre-contract predictions.
44
Q

How would you create a cashflow forecast?

A
  • Need to know the construction programme and contract value
  • Then would use a Cashflow computer programme
  • Or by attributing costs to a construction programme.
45
Q

What’s the benefit of cashflow forecast?

A
  • Allows employer to gain an understanding of financial requirements over the duration of the project duration.
  • Also acts as a check against valuations – early indication of financial difficulties
46
Q

How might turnover affect a contractors ability to undertake a project?

A

Turnover = Total amount that a business/contractor bills to its clients

If a contractor takes on a particular project that exceeds its turnover and there is a sudden delay in payment which occurs it could impact their cash flow and subsequent supply chain causing potential insolvency (to itself and sub-contractors) and risk to the completion of the project.

47
Q

What is a Change Control Process?

A

A proper change control process ensures that changes are identified, costed and approved prior to issue.

48
Q

How may a Change arise?

A
  • through instructions of the project manager or architect;
  • through drawing changes or design development;
  • through site instruction or requests for information (RFIs);
  • as a result of client changes; or
  • through value engineering opportunities.
49
Q

How do you communicate changes to the Client and how do you make an assessment on them?

A

The change control log included in the cost report will describe all changes, allocate a cost to them and identify a funding source.

The change could be funded from the risk allowance, or from budget transfers, or from a source external to the project.

50
Q

How it is best to report Change?

A
  • the number of changes raised in the month;
  • the value of changes raised in the month;
  • the funding sources for the change;
  • the type of change (scope, legislation, and so on);
  • cumulative changes raised;
  • the cumulative value of changes;
  • the amount of changes awaiting approval; and
  • the time taken to approve a change.
51
Q

Describe your understanding of Cash Flows and give example of working with them.

A
  • The cash flow forecast is prepared based on the contract programme & updated as the project progresses.
  • It is used to predict when the client will require specific funds at various points within the project, to allow budgeting & borrowing to be planned.
  • The actual cash flow vs forecast can also be used as method of establishing progress & any serious deviations from the original forecast could represent problems / delays to the contract or even financial difficulty for the contractor.
  • A cash flow takes a typical ‘S’ curve (1st quarter - slow - procurement & mobilisation, 2nd & 3rd quarter - rapid - construction, 4th quarter - slow - completion & demobilisation)
52
Q

How would you prepare a cash flow forecast?

A

There are 2 possible methods for preparing a cash flow forecast:

1) Review the contract programme & allocate costs contained within the contract sum to the various programme activities – costing the programme
2) Use valuations from previous similar projects to ascertain ‘best fit’ profile

53
Q

What is the purpose of change control on a construction project

A
  • The purpose of change control is to provide a method of assessing and managing change, giving detail of consequent cost, programme and scope effect
  • Effective change control procedures enable the monitoring and reporting of cost changes where they affect the out-turn cost and enables the project team to monitor and appraise programme implications and impact
  • The client is made aware of consequences of potential change and the effect this will have on the overall project, this allowing an informed decision to be made with a full understanding of the impact of implementation
54
Q

What measures can be taken to effectively control costs during the construction phase of a project?

A
  • Proactive risk and contingency management
  • Implementing a robust change control process
  • Management of provisional sums within budget
  • Regular cost reporting which is also forward looking
  • Rolling final account with closure process for financial impact of change
55
Q

What information would you include within the cost report for a project procured under a single stage procured under a single stage traditional procurement route?

A

• 1 – Executive Summary:
o Current budget and forecast
o Contingency position
o Level of cost ‘certainty’, i.e. agreement of provisional sums
o Total commitment and expenditure to date
o Final account progress
o Contract position
o Cash flow position
o Progress in the period and current financial position
o Outstanding information
o Major risks or causes for concern
o Next steps and recommendation
• 2 – Analysis of contingency and risk status
• 3 – register of approved changes / instructions and pending changes
• 4 – summary of provisional sums and progress against these
• 5 – value engineering or opportunities register
• 6 - Risk register
• 7 – cashflow forecast

56
Q

How would you ensure cost control on future projects?

A
  • Cost Plan / Estimate - Ensure accurate & sufficient contingency to accommodate design development based on level of information provided. Carry out constant checks & change management as design develops.
  • Tender Issue - Ensure sufficient design information available to allow a robust tender sum to be established. Advise client on risk of proceeding without full information if applicable & sufficient contingency.
  • Tender Return - Cross check tender with estimate / cost plan & reconcile any major variances & reasons why.
  • Post Contract - Cost reporting & change control procedures. Review design on a regular basis & monitor contingency fund.
57
Q

What is the difference between cost management and cost control?

A
  • Cost Management - Total concept for managing & controlling cost on a project from start to finish to ensure contract sum remains within budget. Helps design team prepare design based on a cost.
  • Cost Control - Part of cost management process & occurs post contract
58
Q

How would you provide pre contract cost advice?

A
  • Budget estimate - early on at feasibility stage and would be provided using a cost per unit / m2 based on an indicative scope for the project
  • Cost Plan - when more information is available but before detailed design has begun. Sets a framework for the project so that the design may be developed (builders quants & benchmark rates)
  • Pre-tender estimate
  • Tender analysis
59
Q

How would you monitor costs post contract?

A
  • Reviewing & checking the monthly valuations against the actual work carried out
  • Reviewing the cost of any changes prior to issue & consider if required or alternatives available. Once issued value the works in accordance with the contract, carry out any remeasures if required, focusing on those areas where significant changes have occurred,
  • Review any potential claims before & after submission.
  • Monthly cost reports would be submitted to the client identifying the current value of works, instructions issued, claims notified, anticipated instructions & claims, reconciliation of budget & contract sum.
60
Q

How do you enforce pre-contract change control procedures?

A
  • Regular design team meetings & communication with the project team as a whole.
  • Carry out constant checks against the cost plan & ensure that each elements are within the cost limit.
  • Set up a change log & review upon each set of drawings issued.
  • Make sure client & design team are aware of full implications of the decisions & changes being made.
61
Q

How would you ensure cost control on future projects?

A

Cost Plan / Estimate -

  • Ensure accurate & sufficient contingency to accommodate design development based on level of information provided.
  • Carry out constant checks & change management as design develops.

Tender Issue -

  • Ensure sufficient design information available to allow a robust tender sum to be established.
  • Advise client on risk of proceeding without full information if applicable & sufficient contingency.

Tender Return -
- Cross check tender with estimate / cost plan & reconcile any major variances & reasons why.

Post Contract -

  • Cost reporting & change control procedures.
  • Review design on a regular basis & monitor contingency fund.
62
Q

What is Contingency/risk allowance

A

The purpose of contingency is a sum of money to cover identified risks that may be encountered during the course of the project (unforeseen ground conditions, design development / additional works).
The risks should be reviewed during the course of the project and those risks that have occurred can be funded by the contingency fund.
Those risks that have passed without occurring will result in a saving being made to the contingency fund & the costs should be removed.

63
Q

What is the difference between cost management and cost control?

A

Cost Management - Total concept for managing & controlling cost on a project from start to finish to ensure contract sum remains within budget. Helps design team prepare design based on a cost.

Cost Control - Part of cost management process & occurs post contract

64
Q

How would you provide pre contract cost advice?

A

1) Budget estimate - early on at feasibility stage and would be provided using a cost per unit / m2 based on an indicative scope for the project
2) Cost Plan - commences when more information is available but before detailed design has begun. Sets a framework for the project so that the design may be developed (builders quants & benchmark rates)
3) Pre-tender estimate
4) Tender analysis

65
Q

How would you monitor costs post contract?

A

1) Reviewing & checking the monthly valuations against the actual work carried out, reviewing the cost of any changes prior to issue & consider if required or alternatives available. Once issued value the works in accordance with the contract, carry out any remeasures if required, focusing on those areas where significant changes have occurred, review any potential claims before & after submission.
2) Monthly cost reports would be submitted to the client identifying the current value of works, instructions issued, claims notified, anticipated instructions & claims, reconciliation of budget & contract sum. Cash flow forecast to monitor expenditure to date, in line with initial programme, & in future to ensure sufficient monies available at the right point in the contract. Also provides an indication of progress & on time or not.”

66
Q

How would you advise a client if the Cost Report was showing a significant increase against the Contract Sum & the client did not have sufficient funds available?

A

Consider the potential remedies available to the client including:

1) Consider resequencing the project if the money was not available until the next financial year
2) Value engineer the project
3) Consider cheaper alternative materials or methods of construction
4) Descope the project if possible & take out ‘nice to have’ items such as high quality of Architectural finishes (stainless steel, etc)”

67
Q

What do you understand by Project Controls?

A

Project Controls - monitor time, cost & quality effectively to provide legible & meaningful results

APC Project Management Revision Pack (20 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions