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APC Final Revision > Project Financial Control > Flashcards

Project Financial Control Flashcards

1
Q

Financial Control

A
  • Understand current liability as well as the future position
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2
Q

Typical use of cash flow

A
  • Monitor progress of onsite works against programme
  • e.g. is the contractor requesting more or less than the original cash flow and
  • how is site progress in relation to the programme.
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3
Q

Outline what an S-Curve

A
  • The S shows low expenditure initially with site setup and enabling works being undertaken.
  • the majority of the curve involves the most significant outlay and then the
  • final section tapers off as the number of trades reduces and snagging is completed.
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4
Q

Purpose of Financial Reporting

A
  • Identify likely final account costs based on current and likely future expenditure.
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5
Q

Contents of a financial report

A
  • Contract Sum
  • Variations
  • agreed,
  • under negotiation
  • potential
  • Risk allowance expenditure (UPS 2.5% construction and 1.5% employer change)
  • Provisional Sum Expenditure,
  • Claims,
  • Actual Anticipated Cashflow,
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6
Q

Anticipating Variations

A
  • Keeping up to date with the project by communicating with the contractor to understand any issues that might arise.
  • E.g. UPS dayworks for breaking out drainage; Provisional Allowance subject to identification of extent of works
  • Site level issue
  • Prov Sum for Kitchens
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7
Q

What is cost control ?

A
  • Establishing a clear process for how variations are agreed.
  • E.g. contractor raises issue or omission.
  • Client/EA/QS review issue.
  • Ensures all parties become aware of changes
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8
Q

Financial Meetings

A
  • Monthly meetings to review key change.
  • Financial reports clearly identified what was agreed,
  • what was being negotiated and if an item was only an allowance.
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9
Q

Design risk allocation can be determined through the appropriate choice of procurement route.

A
  • Traditional - Design control but risk held by Client but can impact programme & costs
  • D&B - Passed to MC
  • CM - Client holds control and risk. Flexible until packages are let.
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10
Q

I am aware of how construction costs are typically forecasted

A
  • Monitor progress of onsite works against programme
  • e.g. is the contractor requesting more or less than the original cash flow and
  • how is site progress in relation to the programme.
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11
Q

I am aware of the four types of Risk Allowances as set out in New Rules Measurement 1

A
  • Design Development Allowance Levels - Stage 0-1 – 20%, Stage 2 – 15%, Stage 3 – 10%, Stage 4 – 5%
  • Employer Change Risk – Largely dependent on the type of Client. For example; are they a commercial developer who is unlikely to make significant post contract changes or are they an occupier who may not have much construction experience and may decide to make significant post contract changes (UPS).
  • Employer Other – Similarly to the last point it depends on the client. However, the risk refers to postponement, acceleration and funding issues so can’t readily be foreseen.
  • Construction Risk - Construction risk should be allowed for dependent on the unknown elements of the project. Is there an abundance of information for the project or are there still unknown elements of the work or how it is to be carried out? Allowances can vary greatly depending on the risk of a project. Typically an allowance would be in the region of 5-10%. Refurbishment projects typically attract higher allowances due to unknown scope.
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12
Q

I am aware of the mechanisms which are set out within the JCT Design and Build 2016 contract for facilitating change.

A
  • Change from ER’s; Design, Quality or Quantity or Imposition (site access, working hours, reduced working area)
  • Employer makes EA aware
  • Instruction/EAI (if immediate) or Estimate
  • Change Proposal to Contractor
  • Contractor Price – Accepted or Negotiated
  • MC include OHP, design fees, H&S, programme impact
  • Instruction by EA
  • Contractor confirms within 7 days
  • takes effect from 7 days of confirmation
  • If Contractor does not comply Employer/EA can give notice
  • 7 days post notice 3rd party can be appointed
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13
Q

I appreciate how financial control and cost reporting can help Clients in understanding the financial status of a project.

A

Can just Financial Control or Cost Reporting be used? Best worked in conjunction with each other

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14
Q

Q - How might the D&B change process differ to the JCT Standard Building contract?

A
  • Client Direction
  • Design Team (D&B MC employs Designer)
  • QS Estimate
  • MC Quote
  • Negotiate
  • Instruction CAI
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15
Q

I prepared cost reports on the project including variations along with their current status’ allowing me to effectively manage costs

A
  • Understanding the financial status of the project enabled me to communicate to the client what risks were outstanding and what the likely financial implications were.
  • My understanding assisted the client in being able to make decisions that would aid in the successful overall delivery of the project.
  • The UPS distribution warehouse project was procured traditionally, and the client was to occupy the building.
  • I found that the reporting process was more involved than projects I had worked on where the client was a commercial developer who regularly undertakes construction projects.
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16
Q

UPS redundant drainage run

A
  • Traditional (SBC) Client retained risk as had not been identified in Site Investigations
  • 1% Construction risk allowance
17
Q

UPS Change Control

A
  • Client or MC Change request
  • MC Estimate - OHP, Programme, H&S
  • ME(QS) Review -
  • Agree / negotiate
  • Contract Administrator instruction
18
Q

SBC vs D&B UPS

A
  • With the project being Traditional the client was liaising directly with the design team and
  • changes would be issued to the cost management team who would provide costs to the
  • contract administrator who would confirm with the client if they were happy to instruct the change.
19
Q

How did you confirm the planning status of the car park extension?

A
  • The planning had been approved with an option of larger car park (future expansion)
20
Q

UPS Prov Sum Kitchens

A
  • exact locations and layouts had not been confirmed at the time of tendering the works.
  • Clearly identified PS status including date for instruction.
  • Reminded Client near to time date for instruction inc potential impact on cost and programme
  • 6 week instruction required ahead of programme
21
Q

What was the key components of the Interim Report for Heyford Housing?

A
  • Cost (budget, contingency)
  • Programme
  • Statutory (Planning & Building Control)
  • Design
22
Q

Was the construction risk allowance used?
How did this impact the remaining allowance?

A
  • Ground improvement was required which needed isolated ground to be removed and replaced
  • Costs associated with these works were attributed to the Construction Risk Allowance
  • Contract Sum circa £2m
  • 5% Construction risk allowance £100k
  • Variation circa £10k
23
Q

Risk of use of Provisional Sums UPS?
What is an Undefined PS?

A
  • Higher proportion more likely to impact on cost and programme. E.g. MC can claim L&E from Prolongation of works.
  • Undefined - greater risk as impact on programme
  • e.g. Derby Demo suspected Petrol tanks
24
Q

UPS Prime Cost Sum

A
  • £TBC/m2 allowed for in relation to Tiling materials £50/m2 included in Contract
  • Cost of material Provisional subject to confirmation of actual product
  • All other costs included
25
Q

Prior to the end of the contract, the Main Contractor contacted the Client suggesting that a Final Account could be agreed in advance. I advised the Client that this would not be beneficial to them

A
  • A number of variations were under negotiation and I was aware that inflated rates & quantities had been submitted
  • A split between MC & Client would have favoured MC.
  • Agreeing variations quickly was not beneficial to Client and they were under no obligation to do so
  • Client keen to wrap up project finances so final account was actually agreed ahead of project but that was under Client instruction
26
Q

The developer decided to change the type of bricks that were used which due to the economic climate would result in an uplift in costs. The developer then claimed that the bricks should be funded through the construction contingency claiming that the cost overrun was outside of their control. I advised the Lender on my assessment of the change and how the cost increase would diminish the contingency early on in the project. I further outlined what should be required by the borrower in in order to instigate the change.

A
  • Not construction risk
  • Employer change but no allowance
  • Construction risk allowance provides assurance to the lender that the scheme is fully funded.
  • Early expenditure by employer change would use construction allowance prematurely, increasing the project risk profile
  • Brick change to be funded through equity
27
Q

What risk allowances were included on UPS?
How did you represent this expenditure in the costs report?

A

Construction Risk Allowance - 1% £350k
Employer Change - 1% £350k
No DD (Stage 4 Traditionally procured)
No Employer other

I attributed variations to the above two categories.
e.g. Construction Risk; Step levels, breaking out redundant drainage run
e.g. Employer Change; Car park extension

28
Q

Post contract the Employer wished to extend the car park that had been included within the contract. I ensured that the change control protocol was followed in line with the contract form. I confirmed where the expenditure would be attributed to within the project budget.

A
  • Expansion option - PM/CA confirmed vis instruction
  • Followed existing CSA rates
  • Hardcore Subbase
  • Base course
  • Binder
  • Surface (asphalt)
29
Q

I produced interim reports for the Lender, confirming project expenditure against the agreed budget. I reported on the expenditure of the Construction Risk Allowance, confirming the remaining sum aligned with the minimum requirement to be maintained in the Facility Agreement.

A
  • Ground improvement required - excavate Phase 9
  • 5% Minimum Construction Allowance to be maintained relative to the Construction Cost to Complete

APC Final Revision (22 decks)

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