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.
How did the change control procedure advise the client on the status of changes on the rest refurb for zenith management?
- Identified requests for further information to price the change.
- Identified who the owner of the change was.
- Identhed it price and time implications had been submitted
- Identified if the value of the change had been agreed or not
You mention change control, does the contractor have to agree with an issuer
change instruction?
Under a D&B contract section 2 (carrying out the Works) the contractor is required to comply with any instruction by the Employers Agent unless:
Where the instruction requires a change referred to in alteration of materials or goods being used in the works in (5.1.2). contractor does not have to comply with notitication of reasonable objection;
Notification under 2.20.2 (supply or use may infringe patent rights), contractor does not need to comply pending confirmation
What would vou do if a Contractor did not want to comply with the instruction?
Employer could instruct a different contractor to do the works and deduct the cost of doing so from the contract sum.
How did you value changes on the zenith management resi retub project?
- Client request for more door replacements.
- Used contract rates m
Talk me through the change control procedure on the residential refurb for zenith
- Change raised using formal change request form
- Contractor provided cost and programme implications
- 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
- Details of change
- Owner
- Status
How did vou implement the change control procedure within the contract on the zenith job?
- change control processes was included in the contract documents.
- Managed the change control tracker
- Valued changes.
- Advised on whether changes had been agreed or not.
How did the change control procedure advise the client on the status of changes on the rest refurb for zenith management
- Identified requests for further information to price the change.
- Identified who the owner of the change was.
- Identhed it price and time implications had been submitted
- Identified if the value of the change had been agreed or not
How did the change control procedure advise the client on the status of changes on the rest refurb for zenith management
- Identified requests for further information to price the change.
- Identified who the owner of the change was.
- Identhed it price and time implications had been submitted
- Identified if the value of the change had been agreed or not
You mention change control, does the contractor have to agree with an issued instruction.
- Under a D&B contract section 2 (carrying out the Works) the contractor is required to comply with any instruction by the EA unless:
Where the instruction requires a change referred to in alteration of materials or goods being used in the works in (5.1.2). contractor does not have to comply with notitication of reasonable objection;
Notification under 2.20.2 (supply or use may infringe patent rights), contractor does not need to comply pending confirmation
What would vou do if a Contractor did not want to comply with the instruction!
7 days to comply otherwise another contractor can be instructed and contractor charged for this
How did you value changes on the zenith management resi retub project?
- Replacement of an existing door, I used rates from the CSA.
- Replacement of a balcony door, this was done by agreeing on a fair and reasonable price for this item.
What would you do if the contractor does not agree with your assessment of their variation?
- Aim to negotiate an agreement
- If not dispute resolution procedures
What are valuation rules under a D&B contract?
- Allow for addition or omission of design fees
- CSA if similar in nature and quantity
- CSA rate with adjustments if similar but deviates in quantity
- Fair and reasonable
- Day works
What are the valuation rules under MWD?
No detailed valuation rule but;
- Agree value prior to instruction.
- If not, QS valuation.
- Aim to agree fair rates and prices.
What is day works and what is the procedure?
A sheet which shows materials, labour and machinery used in an activity.
1. Contractor provided vouchers to EA for sign off.
2. Once signed QS checks rates from
“definition of Prime cost of day works” and agreed % additions applied from the pricing document.
What is day works and what is the procedure?
A sheet which shows materials, labour and machinery used in an activity.
1. Contractor provided vouchers to EA for sign off.
2. Once signed QS checks rates from
“definition of Prime cost of day works” and agreed % additions applied from the pricing document.
When might day works be used?
When the works are short or limited in scope I.e. Testing, opening up, repairs.
Is the contractor required to submit a price for a change under the contract?
Under D&B yes, If schedule 2 applies then yes but not if;
1. Can reject if they provide reasoning e.g. poor design into, access to area
Is the contractor required to submit a price for a change under the contract?
Under D&B yes, If schedule 2 applies then yes but not if;
1. Can reject if they provide reasoning e.g. poor design into, access to area
If you have not agreed a variation value with the contractor, how would vou report this in the cost report?
- Identify the difference between mind and the contractors value noting that it is not agreed.
You mention a contingency allowance is there a cifference between a contingency and a provisional sum? Is there a difference in how vou manage these 2?
Contingency is a general allowance for unknowns or additional works.
Prov sums are directly related to an item of work.
On the hotel suites, What was the method for dealing with contingency on this project
General contingency method.
How do vou report on risk within vour cost report?
- Included contingency expenditure tracker.
- Included key risks on exec summary.
Why did you advise that a contingency tracker was used between interim cost reports on the hotel suites project?
Due to short programme time. Weekly updates helped the client make informed decisions.
What was included in the cost report on the Zenith Management resi refurb?
- Exec Summary - anticipated final account, % time elapsed, contingency tracker
- Anticipated final account breakdown
- Prov sun tracker
- Instructions
- Anticipated instructions
- Claims
- Cashflow
What is an agreed project cashflow?
Where the cash flow is known by both parties who are in agreement.
What is the difference between a Contractor and Client cash flow?
- Contractor based on programme and activities.
- Client based on an s-curve, may have other project costs included.
What would vou do if the Contractor was claiming below the cashflow forecast?
- Speak to them to see why.
- Could indicate;
Behind programme, inaccurate cash flowing, delays
What would you do if the contractor was claiming above cashflow?
- Speak to them.
- Could be;
Front loading, ahead of programme, re-sequencing, materials ordered before they need them
What is a general contingency pot?
A sum of money set aside for unknowns and additional work
What are the methods of managing risk post contract?
General
- Maintenance
- progressive release
Pre-defined risk
- Reduced as risk occurs or passes
Why did you include the balance of risk in your cost report on the zenith job?
To inform the client of the residual contingency
What are the heads of claim for LOE?
- Prolongation
- Loss of profit
- General disruption - productivity & uneconomic working
- Finance charges
- Wasted management staff
When can a contractor make a Lot claim?
- Failure to give posssesion
- Failure to give access
- Changes or instructions
- Failure to supply materials or goods
- Delays in instruction
- Opening up works which proves to be compliant
- Prov sum expenditure
- Disruption to work
What are the timelines for assessing LOE under D&B?
