U7 Cost Control

Question 1

What are the five basic requirements of Cost Control?

Answer 1

1 Planning
2 Publishing
3 Measuring
4 Comparing/reporting
5 Correcting

Question 2

Cost Control: Planning, what is it as part of the cost control system? (2)

Answer 2

The plan is either the detailed cost plan or the prices bill of quantities.

Question 3

Cost Control: Publishing, what is it as part of the cost control system? (2)

Answer 3

It is the published or circulated cost plan or bill of quantities, issued to the whole design team.

Question 4

Cost Control: Measuring, what is it as part of the cost control system?

Answer 4

During the contract, measurements and comparisons are made to ensure that the quantities used on site are as anticipated, and any changes required are identified, which can be corrected.

Question 5

Cost Control: Reporting, what is it as part of the cost control system?

Answer 5

Reporting on changes ensures that the client is informed of any variations, if these are likely to increase costs, then correcting actions can be taken.

Question 6

What is the need of a cost report to the client?

Answer 6

Regular reporting to the client to inform them of any changes that have been approved or instructed, and their likely effect on the final account.

Question 7

What is the method of producing a cost report to the client?

Answer 7

The cost report will cover the adjustments of:-

Contingency
Prime costs
Provisional sums
Variations
Fluctuations
Loss and expense

This will give an assessment of the anticipated final account for the project.

Question 8

What is the need for cash flow forecasting?

Answer 8

The formula for the traditional s-curve is used to generate the monthly anticipated payments.

Contract Sum
Contract period
Retention
Defects time period

Question 9

What is the procedure for the preparation of the final account?

Answer 9

Should fallen the format as the monthly reports which should be easily crosse referenced between instructions, verbal instructions and meetings.

Question 10

How are provisional sums adjusted?

Answer 10

Normal practice to omit all from the contract and to pay for any works under architect’s instructions.

Question 11

What are the requirements of the contractor’s cost control system?

Answer 11

Basic functions are to estimate and predict the project CASHFLOW and FUTURE PROFITABILITY.

Question 12

What are the five steps required for Cash Flow Forecasting.

Answer 12

1 - Calculation of turnover/income.
2 - Calculation of expenditure.
3 - Calculation of payment of cost items.
4 - Calculation of subcontract values.
(From above items)
5 - Calculation of anticipated cash flow.

Question 13

What is the basis of Turnover/income

Answer 13

Set accountancy period.
Using S-curve.

Question 14

What is basis of calculation of expenditure?

Answer 14

Deduction of overhead/profit leaves anticipated expenditure.

Question 15

What is the calculation of the payment of cost elements?

Answer 15

Payment dates when expenditure is due, broken down into :-
Labour
Plant
Materials
Subcontractors
Supervision

Question 16

What is the calculation of subcontract values?

Answer 16

Takes into account MCD discounts and retention provisions.

Question 17

What is Cost Value Reconciliation?

Answer 17

It is a comparison of the net realisable value of the work compared to the costs incurred in reaching that stage of work.

Question 18

What are some of the seven reasons for completing cost value reconciliation?

Answer 18

1 - To ensure that work is being completed profitably.
2 - To compare profitability against tender.
3 - Highlight any problems so actions can be taken.
4 - Provide information to estimating department.
5 - Information for management accountability.
6 - Calculation of final project outcomes.
7 - Review potential losses.