Project finance (control and reporting) (L2) Flashcards
When working on the Franklaw project what records did you require to audit the Contractor’s defined cost.
o Timesheets for, staff, labour and design
o Subcontractor payment applications and payment certificates
o Invoices for plant, materials and equipment
o Breakdown of any consolidated invoices
o On-hire and off-hire notes/ records for equipment
o Delivery notes for plant and materials
Talk me through a cash flow you have produced.
o At United Utilities we do not produce cash flows but rather report on value of work
o In other words, rather than forecasting expenditure we forecast the value of work that will be complete which does not necessarily translate into payment to the Contractor
o For example under an Option A, we profile out the Price of each activity rather than forecasting when that activity will become due for payment
o To produce this we use the programme and the activity schedule
How did you go about gathering the information required for this?
o Each month the Contractor submits a programme and
o We also have an updated activity schedule each month that aligns the latest Accepted Programme
o This information is then used to produce the forecast
How would you create a cashflow forecast?
o I would need the programme and the contract sum analysis for this
o The values for each element of the works would be forecast in line with the programme
o But I would split the works into different packages as shown on the programme and include individual s-curves for each package
How would your cost report differ on a lump sum versus a target cost contract?
o Under an Option A the forecast final PWDD will match the forecast total of the Prices
o Whereas under an Option C the forecast final PWDD could be less than or in excess of the forecast total of the Prices i.e. Target Cost and so the forecast Pain/ Gain position also needs to be reported
o Additionally, under an Option A you are forecasting activities
o Whereas under Option C you a forecast Defined Cost which are individual cost components such as People, Plant and Materials, Equipment and Subcontractor costs etc
If your cost report showed that the expenditure was significantly behind previously forecast – what could this have been a sign of?
o If expenditure is behind previous forecast, it could signify that the works are behind programme
If the expenditure was ahead, what might that indicate?
o If expenditure is ahead of previous forecast, it can signify that works are ahead of programme or there have been Variations
How does your reporting deal with Early Warnings?
o At United Utilities, the report that the QS produces will not make any cost allowance for early warnings or anticipated instructions
o This will be done by the Project Manager and Project Controller
o However, I am aware that the RICS Cost Reporting guidance note sets out that all anticipated instructions and early warnings should have a suitable allowance in the cost report
How do you deal with risk mitigation within your reporting?
o The risk mitigation strategy would dictate how it is dealt with in the report
o For example, if the Employer was wanting to avoid the risk and it was his risk under the contract then he may be required to give an instruction and so this would have to be accounted for under anticipated instructions
o Alternatively, if it is a contractors risk and it is a reimbursable type contract an allowance would be needed for it in his forecast which would also need to be agreed with the client
Tell me about a specific risk you have identified and actions you have identified to mitigate this risk?
o On the Williamsgate project, we were hiring pumps via a CE to the Contractor
o Due to difficulties in obtaining a permit the hire of the pumps kept being extended
o Given the tight budget I highlighted the cost risk associated with the continued hire of these pumps
o To mitigate this risk I suggested that it may be cheaper for the Employer purchase the pumps if we believe the pumps will be required on a long-term basis
How would your reporting deal with provisional sums?
o Use NEC so no such thing
o However, I am aware that at the outset the cost report should include the full amount for each provisional sum
o As work is instructed and valued, the provisional sum should be adjusted to reflect the cost incurred and forecast cost to be incurred.
o This affords the client with the earliest opportunity to take action to mitigate cost increases against a provisional sum or make use of any savings achieved
