Project Financial Costing and Reporting Flashcards
How do you manage inflation under the JCT?
JCT provides three options A, B, C
* Option A: contribution, levy and tax fluctuations
* Option B: labour and materials cost and tax
* Option C: Formula adjustment
How do you manage inflation under NEC?
Inflation is a secondary clause X1 which can be included or removed from the contract. If not included there is no option to claim for inflation.
How is inflation calculated?
Inflation is calculated from the base date which is stated in the contract. The BCIS indices are used to calculate the price adjustment factors. The Quarters are calculated based on the contract date.
You have mentioned that you carry out Forecasting and reporting, What are the key components that are needed to develop a cash flow forecast for a construction project?
- I would refer to contract to understand the contractual mechanism (option A – E)
- I would establish the contract prices and the breakdown
- I would obtain the programme of works to understand how the elements of work are carried out and reflect the contract prices with the programme
- I would establish risk budget provisional sums and preliminary items
- I would establish; Agreed, Ongoing or Potential Compensation Events or Variations
- I would establish Actual Costs through Cost ledgers and ensure the Cost is coded to the correct budget elements.
- I would track the actual cost against the forecasted to understand if there is a cost overrun or cost savings.
- I would look at the Outturn forecast for the life cycle of the project to understand the cost impact.
- ITWO is a forecasting software that is used on the project to resource load the full programme of works for HS2 Main Works contract.
Give examples of cost variances that you would look out for while you are carrying out Forecasting and Reporting?
In the monitoring subcontract there are Instances that I monitor is bulk purchases of equipment, long lead items, delays due to cancellation of possessions, delay due to unforeseen ground conditions, compensation Events to the Employer, rebase lining the programme.
How is cashflow managed in your project?
- By compiling Payment Applications to the Employer HS2 I am aware of how cash is received to a project. By assessment of payment applications from the supply chain and compiling monthly liabilities I am aware of the cash moving out of the project.
- On a monthly basis, I advise the commercial manager of the forecast costs for the lifecycle of the project. I project costs based on the progress of works on site, long lead items, bulk purchases, delays in works, procurement of supply chain or Early contractor involvement, advanced payments and defects.
- I also advise the commercial manager of level of commercial risk by reconciliation of Actual Cost against existing budget which shows recovery requirements.
What is your understanding of contingencies?
A budget put aside for unforeseen costs, risks, events or changes in scope that affect the projects cost over the course of the project.
What is your understanding of risk allowance?
An allowance of the budget for a scope of works based on a Risk Matrix to account for risks that arise in relation to the works such as ground conditions, access restrictions, delays). In my project usually 20% of budget if high risk and 5% of budget is low risk and 10% medium risk.
What is your understanding of outturn cost?
The actual cost of the total construction cost calculated at the end of the project or specific contract.
What is Outturn Forecast?
During my monthly reporting I calculate the outturn forecast of the works to be completed based on the programme of works.
What do you understand by cost accrual?
If the Contractor is required to stop works the total liability to be paid out at that point in time minus the amount already paid to date.
What do you understand by cost coding and activity-based costing?
All budgetary activities are allocated codes. The actual Cost is coded to the cost codes based on the scope of works. This allows commercial to track actual costs against the budgetary items to understand the cost incurred against the budget.
What do you understand by subcontract liability?
If the Contractors stops works at the point in time, the total amount that is owed to the Subcontractor for the works that have been carried out.
What are contra charges
When the Subcontractor is owed moneys to the Contractor. This can be materials that the Contractor has provided that the subcontractor was required to purchase as part of their contract price.
