Project Finance to L3 - SoE Q’s Flashcards
What is the purpose of post contract cost reporting?
Provide an overview of the clients current and future financial commitments.
Inform the client of the likely outturn cost.
Give the client an understanding of potential savings or additional monies required.
Can you elaborate on what is included within the Cost Reporting guidance note?
The cost reporting guidance note looks at a few differing elements. Looking at the different types of cost reports, including project, programme and detailed cost reports.
It further looks at costs that affect the construction cost i.e. fixed, and variable, including prov sums, prime cost sums, dayworks.
As well as variations, which includes contract instructions, anticipated variations, loss and expense, fluctuations and risk allowances.
Reporting of costs should be monthly to fall in line with valuations, but this is dependent on client requirements and therefore may be more/less.
What is a fixed cost?
The costs that have been agreed to be paid for the known works.
Contract Sum
What is a variable cost?
Provisional sums
Variations
Loss and Expense
Risk allowances
How are provisional sums treated post contract?
Adjust sum with actual cost in cost report.
Final Account - Omit sun and replace with actual cost.
How are variations / Instructions treated in a cost report?
Valued in accordance with contract (contract rate, fair & reasonable, day works).
State wether cost is agreed or not. Cost report always based on QS valuation.
How are anticipated instructions / variations treated?
Valued by the QS based on:
1. Change request issued by contractor.
2. Change request issued by employer.
3. Programme delays due to client.
How are risk allowances treated?
Included at outset based on costs for each specific risk taken from risk register.
As variations / instructions occur cost is offset against each specific allowances.
How is Loss and Expense treated?
JCT - claims reported separately.
Client can instruct QS to ascertain amount of a LoE but this is an additional service. If instructed QS should assess information submitted in support of claim and make appropriate allowance.
If QS not appointed to assess then ask if the matter is to be excluded from report.
How is general contingency treated?
- General risk allowance maintenance method - cost incurred should be set against general contingency allowance. Balance is maintained throughout the project.
- General risk allowance progressive release method - Balance progressively reduced on an agreed basis - pro-rata to:
Percentage completion of project
Percentage completion of cost
Advantage - allows for greater efficiency in use of capital. Can be used for expenditure outside of the project.
How are risks identified?
Following a risk analysis as part of a risk workshop.
A risk analyses is used to identify potential risks, identifying the likelihood vs impact to give an overall severity rating.
What are the different types of provisional sum?
Defined - Allowances within the contractors cost for prelims and OH&P
Undefined - No allowance within the contractors cost for prelims and OH&P, may be due additional time and money in respect of EoT and loss and expense.
What are the importance of change control procedures?
• All relevant parties are notified
• Change is properly assessed in terms of cost, time, quality
• Formally records changes once agreed
What do you mean by an effective change control procedure?
A clear and effective communication system which is able to manage efficient change on a project.
This is performed in various ways on my projects, the first being regular cost reporting, keeping project stakeholders up to date with any recent changes/ variations.
l also now deal with electronic control systems, such as Asite and CEMAR, where project changes are raised and communicated to all project stakeholders.
Why are change control procedures important?
Change control procedures are important to keep the client up to date on the financial position. This will inform them whether we are on budget, or whether there may be a requirement for additional funding.
Why is cashflow forecasting important?
Cash flow forecasting is important as it details the income and expenditure across a period and is used as a tool for predicting funding at that point in time.
How is a cash flow produced?
A cash flow is produced in one of two ways, depending on the stage of the project.
Pre contract I would use an S Curve formula, but post contract I would use the pricing document and the contractor’s programme.
What is ‘variation’?
A variation comes about due to an alteration or modification to the design, quantity or quality of the construction works.
A variation can refer to two things, a relevant matter or relevant event. These gives rise to loss and expense and EoT, respectively.
Have you ever heard of ‘S Curve”? What is the rationale behind? Is there any difference between cashflow curves between contractor’s own and projects?
An S Curve is typically seen on a construction project. It refers to the sequencing of works and how progress would be slower to begin with, followed by an exponential increase in spending during the middle of the project. At the end it would start to level off again.
What was the role of the Employer’s Agent post contract?
• They were responsible for the following:
• Chair Project Meetings
• Review and approve design development
• Monitor project quality against ER’S
• Manage the delivery of the project against project programme
• Issue payment notices
• Implement the change management process
Talk me through the change contro procedure on the residential refurb for zenith?
- Change raised using formal change request form
- Contractor provided cost and programme imolications
- I made an assessment of the cost.
- EA assessed programme
- Assessment provided to the Client for approval.
- instruction then issued.
What was included in the change tracker on the resi refurb for zenith?
- Nature
- Owner
- Status
How did vou implement the change control procedure within the contract on the zenith management resi refurb proiect?
I followed the procedure provided by the EA which was appended to the contract documents.
