Project Finance (Control & Reporting) - Level 1 Flashcards
What are the techniques?
The techniques of project finance would be to have a document that contains a schedule of the contract sum, a schedule of any variations/site instruction, a schedule for contingency and a schedule for provisional sums and prime costs sums which can be updated monthly and reviewed with the client so that the client can ensure that the necessary finances are in place for the project.
What is the difference between cost control and cost reporting?
The purpose of cost reporting is to inform the client in a construction project of the likely outturn cost of the construction project. The forecast of outturn costs may be expressed as a variance against a budget amount, or expressed in absolute terms.
Cost control is the process of regular and accurate cost reporting to provide clients and project teams with the best available data upon which to base future project decisions. Cost increases and cost savings should be discussed for the scope of works and for the whole life impact of the project.
As a QS what should you be doing for your client?
Providing frequent, regular, and accurate cost reports to the client with the best available data upon which to base future project decisions.
How would the number of changes affect the frequency of reporting?
Changes such as contract instructions, loss and expense, fluctuations and risk allowances all have an affect on costs. Where increases in change causes an increase in cost as they are additional work to the contract.
Would it not be better to prevent/manage the changes rather than just report on them?
Yes it would, however in some cases change is inevitable, such as when discoverable items are identified which result in contract instructions.
How do you compile a risk register?
A risk register is a risk management tool generally adopted as a central repository for all risks and threats identified. They are compiled in a table which states the title of the risk, the cause of the risk, the consequence of the risk, the risk owner.
How do you quantify them?
They are quantified with qualitive analysis which scores on the probability, cost, time, reputation, environment and health and safety which gives a pre or post mitigated risk score.
What are the key components of a cost/value reconciliation?
In its most simple terms, the CVR is the profit and loss statement for the project, whereby the contracting organization calculates the amount of work done to date, and the amount of cost incurred to date. The two are then compared, with the difference being the amount of profit or loss made at that point in time.
What is the importance of having a project cash flow forecast?
Cash flow is the lifeblood of the construction industry and relates to the incoming or outgoing of money to or from a company or construction project over a given period (usually monthly).
In simple terms the purpose of a cash flow forecast is to ensure that the employer has an accurate assessment of what needs to be paid to the contractor and at what periods, therefore the employer’s bank or funder needs to be aware of draw-downs to manage the movement of funds to meet the contractual timescales of payment.
What information would you provide in your cost report?
A project cost report captures historic and forecast costs across a construction project. Typical cost report headings are given below:
* construction costs
* professional fees
* statutory fees and charges
* third-party costs
* direct works costs
* land costs
* agency costs
* finance cost; and
* legal fees.
How would you define contingency?
I would define contingency as a risk allowance.
What do you understand to be the difference between prime cost and provisional sums?
A provisional sum is the cost allowance for works or services whose design specification are not known, and the extent is not known or sufficiently well known at the date of contract.
Prime cost sums are the financial adjustment of work whose extent is known, but whose specification has yet to be determined.
