Project Finance Flashcards

1
Q

How would you create a cashflow forecast?

A
  • I would need to have access to the construction programme and contract sum analysis in order to populate the cashflow.
  • The values associated with each element of construction could be forecasted at times to reflect their installation within the programme.
  • I would split the works into the different packages as shown on the contract programme and include individual s-curves for each package.
  • Obtaining drawdown schedules from specialist subcontractors and professional consultants can also assist when populating the cashflow.
  • An alternative approach would be to utilise a previous cashflow from a similar scheme or to use cashflow forecasting software although this may not be as accurate.
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2
Q

If your construction budget was £2.5m and proposed construction
period was 25 weeks, would a forecast cashflow expenditure of
£100,000 per week be realistic?

A
  • In reality this would not be very realistic as the cashflow expenditure per week is unlikely to have a flat or regular profile.
  • In reality the expenditure is much more likely to have an S-curve profile where at the start of the scheme, the expenditure per week will be fairly low as the site setup and enabling works are undertaken.
  • As the scheme progresses, items that are of higher value such as the steel frame and M&E installations will be undertaken. The cost expenditure per week at this stage will be much higher than at the start of the scheme.
  • As the scheme draws to a close, minor finishing items such as decoration and cleaning packages will be undertaken again resulting in a lower expenditure cost per week.
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3
Q

What is the benefit of a cashflow forecast?

A
  • A cashflow forecast allows the employer to gain an understanding of the financial requirements over
    the duration of the project duration and setup any funding requirements for the scheme in advance.
  • It can also act as a check against valuations and provide an early indication of financial difficulties if the
    actual expenditure is lagging behind the forecast.
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4
Q

What would you include within a financial report?

A
  • I would typically look to include reference to:
    o a) Contract sum total.
    o b) The value of Instructed variations.
    o c) The value of potential future variations.
    o d) Ongoing claims.
    o e) Provisional Sum Adjustments.
    o e) The anticipated final account total.
    o f) The total of certified payments.
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5
Q

What is the purpose of a financial report?

A
  • To report against budgeted values and act as a working cost check on the project budget.
  • To give the Client an understanding of any savings or additional monies required.
  • To report contract progress compared against pre-contract predictions.
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6
Q

What are variations?

A

Alterations or modifications to the design, quality or quantity of the contract works or to the site access or working conditions.

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7
Q

Why might a variation arise?

A
  • a) change to specification.
  • b) discrepancies between contract documents.
  • c) discrepancies with statutory requirements.
  • d) errors and omissions.
  • e) deficiencies in employer’s requirements.
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8
Q

What are dayworks?

A
  • The prime (actual) cost of all the materials, labour and plant used in carrying out the work, along with a
    percentage additions to each category as set out in the contract.
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9
Q

What are the relevant matters?

A

There are 5 relevant matters:-
o Variations.
o Instructions.
o Execution of an approximate quantity that was not a reasonably accurate forecast of quantity.
o Suspension by the contractor for non-payment.
o Any impediment, prevention or default by the employer.

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10
Q

What are risk allowances?

A
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11
Q

On Mercury House you’ve mentioned effectively managing costs for enabling works. Can you talk me through how you did that.

A
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12
Q

How did you manage the overhead costs for project management on the Mercury House project

A
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13
Q

On Cricklewood you mentioned about preparing a cost estimate for budgets for enabling works. Tell me how you went about doing that?

A
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14
Q

On Cricklewood you mentioned forecasting contingency? What level of contingency did you choose and why?

A
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15
Q

On Cricklewood you mentioned monitoring actual costs against budgets. How did you go about doing this

A
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16
Q

On Cricklewood why was there an insufficient allowance made for asbestos at tender stage?

A
17
Q

How did you ensure you didn’t go over budget with instructing variations?

A
18
Q

How did you use the contingency pot to advise your client?

A
19
Q

P Programme reporting of variations

A