16. PF Flashcards
Tell us what you know about the GN on Cost Reporting, 1st edition.
I learnt that the purpose of Cost Reporting is to inform the client of the likely outturn cost of the project. I learnt that costs can be reported at three basic levels: a construction contract, a construction project, or a programme of construction works.
Why do you do cost reporting?
To inform the client of the likely outturn cost of the project.
What is cost reporting? How do you go about producing a cost report / forecasting / reporting?
(Dai & Emil - will be asked)
Same Q as CM Q12
Cost Reporting is to inform the client of the likely outturn cost of the project. Also seniors / directors / parent company.
On a monthly basis, I carry out:
Liabilities - what we are liable to pay our supply chain. Liabilities are a build up of elements like L, P, M, Prelims. These go into the project cost report. This becomes Cost To Date. In the CVR/F&R meeting, I then advise my Seniors, Directors and the client of variances in forecast vs actual spend in the last period. Is performance on site slower (perhaps obstructions in the ground or harder ground), in which case this would affect our Earned Value (EV). EV is a metric that shows the value of the work completed, against the forecasted (budgeted) value of work. EAC would therefore increase.
Forecasts - speaking to the internal delivery team to establish a likely programme lookahead. They will consider methodology. I attribute costs made up of L, P, M, Prelims & Risk against activities on the programme. This shows a forecast spend per month, and a cost to complete, and then an overall EAC (the outturn cost of the project). Again, any variances, I have to advise the client in the F&R meeting with them.
My example L3 - for this is the Brick Egg Sewer HS2 originally said was not a CE. I advised it was because it wasn’t in the GBR or other Site Information. On our contract, the GBR has been added to Clause 60.1.
What are fixed costs?
These are like lump sum costs. The lump sum payments set out in the contract for specified construction work.
What is a defined provisional sum?
A provisional sum for defined work is a sum provided for work that is not completely designed but for which the following information shall be provided:
– the nature and construction of the work
– a statement of how and where the work is fixed to the building and what other
work is to be fixed thereto
– a quantity or quantities that indicate the scope and extent of the works; and
– any specific limitations and the like identified.
Where provisional sums are given for defined work the contractor will be deemed to have made due allowance in programming, planning and pricing preliminaries.
What is an undefined provisional sum?
A provisional sum for undefined work is a sum provided for work where the information required for defined provisional sums cannot be given. Where provisional sums are given for undefined work the contractor will be deemed not to have made any allowance in programming planning and pricing preliminaries.
What is the outturn cost?
The forecast total construction cost.
You mention ‘change must be issued and managed in line with the contract’. What do you mean by this?
/
Explain the change process.
14.3 The Contractor may give an instruction to the Subcontractor which changes
the Subcontract Works Information.
60.1 What CEs are. ‘‘The Contractor gives an instruction changing the Subcontract WI’’, so making sure I issue the instruction, and follow the steps through to Clause 65 where I implement the CE.
61 Notifying CEs, PM’s response.
62 Quotations.
63 Assessing CEs.
64 PM’s assessment.
65 Implementing CEs (also changes the Completion Date, which was previously only shown as planned completion on the programme).
How do you attribute costs against risks?
Quantitative cost risk analysis (QCRA)
I allocated cost against risks based on cost and probability. Minimum and maximum probabilities were used and applied to cost. I placed the calculations on the risk register which advised the client of minimum and maximum quantified risk allowances for a given risk.
What is the Risk Register?
Document that contains all risks to the project. It is a defined term. It is also referenced in the contract under clause 16, and may be required under the WI.
How did you manage and update cashflow?
F&R
I have forecasted and reported costs.
Cost to date.
EV. Previous forecast spend in month vs actual spend to show EV.
Forecast of the remaining cost across the remaining months.
Showed an EAC.
Updated iTWO.
WP26.1 B - What were the provisional sums, risk allowances and assumptions you reviewed from the Subcontractor’s tender.
Provisional Sum:
Non-contestable items (SUs) - included in the price, however the item cannot be priced by the Contractor accurately at the time of entering the contract due to lack of enough detail. I advised them to remove BT as no longer required. Also because they are not on the NEC. Note: Provisional sums are allowed in the JCT, but not NEC. If a piece of work is of an unknown cost or quantity, it cannot be included in the WI. Once the project has started the time and cost of that particular piece of work would become a CE.
Risk allowances:
Depths of concrete in the road. I advised them to remove inflation as should be captured with X1.
Assumptions:
Working hours removed as would be stated in WI.
What is a provisional sum?
They are included in the price, however the item cannot be priced by the Contractor accurately at the time of entering the contract due to lack of enough detail. Provisional sums are allowed in the JCT, but not NEC. If a piece of work is of an unknown cost or quantity, it cannot be included in the WI. Once the project has started the time and cost of that particular piece of work would become a CE.
When providing the change control process training, what did you advise / what timeframe for reporting issues did you establish? (Referral)
EWNs - Explained what an EWN was and that both parties have an obligation to communicate an issue as soon as possible. If we don’t issue an EWN, we are not giving the Client the opportunity to help as mitigate the risk. If we later raise a CE without an EWN, the Client can assess the impact of the CE as if we had raised an EWN, and therefore we may not financially recover what we incur.
CEs - 8 up the line to HS2. Clause 61.3 states that if the contractor does not notify a compensation event within eight weeks of becoming aware of the event, he is not entitled to a change in the prices or the Completion date (or a key Date).
Why is it important to raise EWNs? (Referral)
If you don’t, you are not giving the client the opportunity to help with its mitigation.
Clause 61.5 states that if the client decides that the Contractor did not give an EWN of the event which an experienced subcontractor could have given, he notifies this decision to the Subcontractor when he instructs him to submit a quotation. Significance is that it could be assessed at a lower value. Clause 63.5 mentions this.
Project finance related, you have greater control on future recovery of time and money by raising EWNs.
