Project finance (control and reporting)

Question 1

What is an Actual Cost?

Answer 1

It is the amount of monay paid in order to undertake the scope of works. i.e incurred labour, material, equipment

Question 2

What is an Accrual?

Answer 2

It is the difference between the total liability and the amounts that have already been paid out.

Value of works that are complete but are not yet paid but the business is liable for.

Question 3

Why is cost reporting done on a Regular Basis?

Answer 3

It is done on regular basis to give the business the best available cost data to base its decisions on.

Question 4

How does cost reporting give a client a tool to base its decision making?

Answer 4

Tracks all issues relating to cost on the project

Budget forecast cost, expenditure to date.

Question 5

What is the purpose of cost reporting?

Answer 5

It is to inform the client/business likely outturn cost of the construction project,

Question 6

What does the cost report include?

Answer 6

A construction cost report captures historic and forecast costs incurred under a construction contract.

Question 7

Why is a CVR a tool to base decision making?

Answer 7

As an update CVR provides the best available date to base its decision making.

Question 8

What can a client do if the forecasted final cost is above the allocated budget?

Answer 8

• You can omit elements in the remaining construction work
• Reduces the scale of elements of remaing construction work
• Reduce the specification of elements of remaining construction work.

Question 9

What are factors affecting outturn construction costs?

Answer 9

• Contractor instructions
• Anticipated instructions/early warnings
• Additional cost arising from delays to programme or the disruption to the performance of the contract works
• Fluctuations – inflation for example
• Risk allowances for works or services whose quantity and specification are unknown.

Question 10

What is a CVR?

Answer 10

It is a document that captures the amount of work done to date and the amount of cost incurred date. These two are compared to determine the profit or loss of the company at that point in time.
It can include other cost data like budget, final anticipated cost, the cost to date, risk allowances for a business to make decisions and to understand the progress of the works.

Question 11

What are legal constraints on the cost of the project?

Answer 11

• Building regulations 2010 i.e., gain permission to start building
• Town and Country Planning Act 1990 i.e., to start doing engineering works

Question 12

What is post-contract cost control?

Answer 12

• Post contract control refers to how the budget is managed after awarding the works.
• One example is undertaking forecasting and reporting on a monthly using cost reports like the CVR in order to monitor budget overruns or under spends.

Question 13

What is Cost reporting?

Answer 13

• It’s a regular process to inform the client or other parties about cost data such as the final anticipated cost, the actual cost, and the variances of budget VS final anticipated final cost.
• It actual costs, estimated forecasted costs, risk allowances

Question 14

What is a Change control procedure?

Answer 14

• Change control procedure can be in the form a number of registers tracking various different changes occurred and which suppliers /subcontractors might have might affected with that change.
• Big projects might have a change manager responsible for all change.

Question 15

What is an effective change control system?

Answer 15

• A clear and effective communications system like CEMAR, Aconex

Question 16

How can changes occur?

Answer 16

• drawings or documents issued by the client or client’s representative;
• responses given by the client’s representative to design drawings or technical queries issued under a design and build project;
• unforeseen conditions experienced during excavation activities, e.g. uncharted electricity services;
• new scope instructed by the client’s representative;
• adverse weather as defined by the conditions of contract; and
• access to site restricted by client.

Question 17

What is the consequences of not having a change control process?

Answer 17

• It can lead to inaccurate reporting, which may potentially impact on cashflow reporting/final cost projections for both parties and might lead to the client not having enough money to finance the project.

Question 18

Difference between cost management vs Cost control

Answer 18

• Cost management process of planning and controlling the budget for the full life cycle of a project from the initial planning phase projection completion
• Cost control is concerned with post award of the contract where you compare what the estimated cost is vs the actual cost at certain time causing different variances. Based on this variance corrective action might be required to avoid cost overruns.

Question 19

What is the process of ownership and payment of materials?

Answer 19

• Offsite bonds
• Checking insurances
• Vesting certificate

Question 20

3 types of inflation?

Answer 20

• Tender price inflation
• Resource inflations – labour , material
• BCIS all in – output prices
House builders – have 0 inflation

Question 21

Why was there lower staff allocation of the TM team?

Answer 21

• Individuals did not end up spending as much time as originally thought on managing the traffic management on site. There was 2 packages working on the same road and therefore some of the cost that originally planned for just one package are now split between 2

Question 22

What change control procedures did your advise?

Answer 22

• Advised on how the instructed works impacted the supply chain. For example, in the package we had different specialist subcontractors that would have to undertake the works instructed by the client.

As a result, I advised the client that the main contractor issued instructions to the specialist and it is now waiting for the quotation.

Question 23

What did you advise on timelines?

Answer 23

• Advised on how if the quotation will be submitted as per the contract deadlines as there were instances that as a contractor I had to issue a request for extension.

Question 24

What did you advise on justification cost elements?

Answer 24

• For example, I advised how activities constituted defined cost, by explaining what the activity related to and providing all the evidence.

Question 25

How did you justify that it was defined cost?

Answer 25

• Provided justification that the items paid for were required to carry out the works as stated in the works information.
• I provided the accounts and records to justify the amounts.
• 11.2

Question 26

What did you advise the subcontractor about?

Answer 26

• I noticed that recently instructed change to undertake additional utility diversions was not included in the forecast. I advised that an estimate should be included in the period that the works are planned for order to capture a more accurate final estimated anticipated cost.