Project Finance & Cost Reporting Flashcards
How would you create a cash flow forecast?
I would need access to the construction programme and contract sum analysis in order to populate the cash flow.
The values associated with each element of construction could be forecasted at times to reflect their installation within the programme.
I would split the works into the different packages shown on the contract programme and include individual S-curves for each package.
You could also use forecasting software or utilise a previous cashflow on a similar project - however these are not as accurate.
Why are cash flow forecasts shown by S-curves rather than linear spending?
Expenditure is fairly low at the start as site set-up and enabling works are undertaken.
As it progresses, items of higher value such as steel frames and M&E installs will be undertaken.
As the scheme starts to finish, minor items such as decoration and cleaning packages are undertaken.
What is the benefit of a cash flow forecast?
Allows the employer to gain an understanding of the financial requirements over the duration of the project and setup any funding requirements for the scheme in advance.
It can also act as a check for valuations and provide an early indication of financial difficulties if the actual expenditure is lagging behind the forecast.
What would be included in a financial report?
Contract Sum total
The value of instructed variations.
The value of anticipated variations.
Ongoing claims.
Provisional Sum Adjustments.
The anticipated final account total.
The total of certified payments.
What is the purpose of a financial report?
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 contract progress compared against pre-contract predictions.
What are variations?
Alterations or modifications to the design, quality, or quantity of the contract works or to the site access or working conditions.
Why might variations arise?
- Change of specification
- Discrepancies between contract documents
- Discrepancies with statutory requirements
- Errors and omissions
- Deficiencies in employer’s requirements
What form must architect’s instructions take?
It is best practice under the majority of contracts for instructions to be made in writing.
The QS is not usually authorised to make additions to the contract sum for instructions that are not in written form.
What about oral instructions?
The validity of oral instructions depends on whether the form of contract being used contains mechanisms for them to be valid.
Under a JCT SBC:
- where the CA issues an instruction otherwise than in writing, it shall be of no immediate effect.
- but the CA shall confirm in writing receipt of the verbal instruction within 7 days
- if the CA does not confirm within 7 days it shall take effect as from the expiry of the latter 7 day period.
Usually best practice to follow up on verbal instructions with a written instruction as soon as possible.
Can the contractor object to a variation?
Some contracts will allow the contractor to object to an instruction in special circumstances.
In the JCT SBC the requirement to comply with a valid instruction is subject to certain exceptions where:
- it may affect the efficacy of the design of the CDP
- it may affect the contractor’s compliance with the CDM regulations
- it may infringe patent rights
- it relates to a named specialist, and the contractor is unable to enter into a contract with that firm.
What can the architect do if the contractor does not comply with an instruction?
Depends on the form of contract being used however under JCT Suites if the contractor does not follow an instruction, the architect will be required to issue a ‘notice to comply’ to the contractor.
If the Contractor still fails to comply, the architect can instruct another party to carry out the work and the contractor will be liable for any additional costs incurred.
In this circumstance it is important to record the costs and obtain a range of quotations.
What 3 methods are there of obtaining a variation under a JCT contract?
Depends on the form of contract being used but can be:
1. Agreement between employer and contractor
2. A schedule 2 quotation
3. Valuation by the QS under the valuation rules
What are the time periods for Schedule 2 quotations under JCT SBC?
The architect should request via issue of an AI
The contractor has 7 days to notify that they will not provide one.
If not, they have 21 days to provide the quotation.
The architect then has 7 days to confirm in writing the acceptance or rejection.
The acceptance is called the ‘confirmed acceptance’.
