Project Financial Control & Reporting Flashcards
Why is it important to control costs post-contract?
To ensure that the project budget is not exceeded.
How do you manage cost on a project?
In the pre-contract stages, I do this through cost planning to ensure that design development does not take the project over the Client’s cost limit.
In the post-contract stages, this changes to cost reporting, which is a report showing the estimate final account on an ongoing basis.
The client says they don’t need a cost report issued because they won’t read it. What do you do?
I would explain to the client that for my due diligence, I will carry out a cost report and issuing it to them anyway. I would ask them what the key points of interest are, and arrange a call to highlight these to them.
How do you effectively advise on contingency?
Account for all changes; instructed variations, anticipated and advanced warnings. This will allow the contingency expenditure to be truly reflected.
Why is Change Management Procedure required?
Provides clarity to all parties – they are aware of their roles in the process.
Provides a clear sequence of events / order to effectively manage change.
Tell me what a provisional sum is?
Definition is found within NRM 2. Defined and undefined psums. It’s an item of work that cannot be fully quantified or priced at the point in time.
What’s the difference between defined and undefined provisional sum?
Defined = The works are described in enough detail to allow the contractor to make allowances within their programme and prelims.
Undefined = There is not enough detail for the contractor to make allowances within their programme, and therefore undefined psums remain subject to prelims costs.
How do you deal with provisional sum associated works?
Like I would with any other change. All provisional sums need to be instructed into the contract.
How do you price a provisional sum?
Only able to use the information that is available at the time i.e., whether the item can be measured. Agree the value of this with the client.
What is a cashflow forecast?
A tool that apportions the value of the packages against the programme.
What do you need to explain to the client when you issue a cashflow to them?
Advise any assumptions made. Advise what has been included or excluded e.g., on Acrisure – professional fees, contingencies, FF&E costs are excluded in my cashflow. It represents construction cost only.
Explain how your change management procedure is robust?
Every party is aware of their duty during the sequence / what is required of them.
What procurement route did you recommend for the Century client who is prone to making post-contract changes?
Traditional – As the design is completed in full by the client’s design team and they can be happy with it before it goes out to tender. This will reduce changes post contract.
What do you include in your cost report?
o Instructed variations
o Anticipated change
o Advanced warnings
o Forecast final account
o Expenditure to date
o Psum schedule
o Cashflow forecast
Why do you include advance warnings?
To capture all anticipated change and give a true reflection of the remaining contingency.
What is a cashflow forecast?
The apportionment of the value of packages against the construction programme.
What are some of the reasons a cashflow is used?
Shows the client what their financial obligation is it at a given time.
Illustrates whether the contractor is on programme.
Shows whether the contractor is struggling financially.
Why is beneficial to the client to report the final account?
Allows them to manage their costs, implement fewer design changes and understand how this will impact the project budget.
What is a risk allowance?
A sum of money held for unknown risks that occur in the construction or design phases.
Types of risk are identified in NRM 1.
How do you calculate a risk allowance?
Identified in NRM 1.
Risk allowance estimate = base cost estimate X percentage risk allowance
What is a cost report?
It tracks the forecast final account against the project budget on an ongoing basis.
What is the purpose of a cost report?
To ensure that the project budget is not exceeded.
To inform the client of the position of the budget – can inform whether they have savings or need additional funding.
Can you give me an example of when you have made your cost reports bespoke?
Century projects - the client requested that the summary dashboard only showed changes in the month of over £10,000 as this is what they considered to be a key movement.
On Acrisure, I showed all movements.
Do you report on changes that have not been agreed and why?
Yes, to show a true reflection of the forecast vs. the budget.
Can you give an example of a client change on one of the Century projects?
10 OBS / Soho:
Removal of an exec office and replace with open plan.
There were impacts on multiple packages and this was abortive works close to PC and would result in a delayed completion and the basis for a potential L&E claim from the contractor.
I advised that the client would be better suited to complete the works after PC.
How would the works be undertaken after PC?
It is not something I would typically recommend, but the client would create a PO to undertake the works separately from the JCT contract.
How would undertaking works after PC be more cost efficient to the client?
Eliminates main contractor on costs such as OHP & Prelims.
Reduces the management staff - this would just be a skeleton team to finish the works.
What risks are associated with procuring the works not under a JCT?
The risk lies in there not being the same robust provisions under a PO, however the contractor and the client had a long-standing good relationship and has been reasonable at undertaking these works in a timely manner.
Give me an example of when you have followed a Change Management Procedure.
The contractor filled out the change management form detailing the change.
The contractor submits the time and cost impact of the change to the client.
This is reviewed by the client and the change is approved or rejected.
What is a robust change management procedure?
A change occurs.
EA / CA requests a change order form including description of the change and its time and cost impact from the contractor.
Contractor submits time and cost.
QS reviews and negotiates / agrees the costs.
Agreed cost communicated to EA / CA and client.
Formal instruction issued.
Why is a robust change management procedure important?
Ensures that all parties are aware of their roles and obligations during the process, which should increase efficiency of time.
How does increasing the frequency of commercial meetings help?
I could alert the client to potential cost movements more frequently.
Client is prone to making changes, so it creates transparency on what they can afford and aids the clients’ decision on whether to proceed with change.
