PROJECT FINANCE JC Flashcards

1
Q

PROJECT FINANCE

A

Answer

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2
Q

You mentioned you are responsible for cost reporting to the client. Please talk me through how you would produce a cost report and how this would be presented to the client.

A

Set up meeting to go through key client objectives. This would include:

  • timescales
  • packages to use
  • cashflow
  • arrangement of changes

I would arrange monthly meetings to run through the cost report and would present the initial budgets, any transfers in scope

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3
Q

How do you produce the cashflows on your project and why is this helpful to the client What do they use it for?

A

I use the programme and the cost plan to determine each packages value and time taken. I then input this to software to establish the cashflow amounts.

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4
Q

What are defined v undefined provisional sums? How do you report on these?

A

NAME?

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5
Q

Loss and expense

A

if I was working on a UK JCT contract I would first make sure that a loss and expense claim has been approved as a relevant matter has occured. If it has I would assess the claims of head of the loss and expense.

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6
Q

What risks did you price on Cellzome and how did you price these?

A

This included additional preliminaries costs as there was risk the project could go over by 6 weeks.
I also calculated the cut and fill volume from the civil drawings and used a market tested rate for removing contaminated soil.

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7
Q

What is the purpose of cost reporting?

A
  • To report against bugeted values and act as a working cost check on the project budget.
  • To give the cleint an understanding of any savings or additional monies required
  • To report contract progress compared against pre-contract predictions
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8
Q

What are benefits of cost reporting?

A

Cost reporting regularly and frequently will afford the client and project team the ability to control the outturn construction cost.

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9
Q

How is outturn cost controlled by cost reporting?

A

Outturn cost is controlled by the recognition of cost changes incurred and planned implementation of future cost changes.

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10
Q

What are variable costs?

A
Provisional sums
Risk
Loss and expense
Liquidated damages
Variations
Prime cost sums
Re-measurable contracts
Anticipated instructions
Fluctuations
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11
Q

What is good cost reporting?

A

NAME?

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12
Q

How do you ensure effective control of costs in a project?

A

NAME?

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13
Q

What is cost control?

A

The process of valuing and managing changes. To ensure the project is delivered at the right price.

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14
Q

What are the processes for evaluating change?

A
  • Similar nature – use pricing schedule
  • Contractors quotes
  • Dayworks
  • First principle
  • Schedule 2 quote
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15
Q

Would you issue a final payment certificate?

A

You should never issue a final payment certificate as this would mean you cannot claim for latent defects.

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16
Q

When is the final account produced?

A

Contractor must submit information within 3 months of PC. If they do not, you will need to prepare this and give notice you will do it.

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17
Q

On cellzome, why was it important that the contingency pot was only used for risks which there was no provision for?

A

This is because these risks already have a provision in the contract and using the contingency would not be necessary. All costs which can be foreseen should have a provision within the contract.

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18
Q

What is the purpose of a cost report?

A

To inform the client in a construction project of the likely outturn cost of the construction project. The forecast of outturn costs may be expressed as a variance against a budget amount, or expressed in absolute terms.

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19
Q

What are the contents of a monthly cost report?

A
Lump sum contracts
• contract sum
• adjustment of variable costs
• adjustment of variations
• adjustment of fluctuations
• claims for loss and/or expense; and
• adjustment of risk allowances.
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20
Q

Are there any costs you would exclude from a cost report?

A

If it is a construction cost report i would exclude professional fees, 3rd party costs, land costs, agency costs, finance cost and legal fees.

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21
Q

On the basis that most clients don’t want to read a whole report, what do you convey in the Executive Summary?

A

Budget, forecast cost, risk, approved changes, unapproved canges, provisional sums, cashflow

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22
Q

Would you include contractor claims in your cost report? What about loss and expense and LDs?

A

Yes these would be listed under the unapproved variations until they have been approved.

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23
Q

How have you controlled costs in the design stages of a project?

A

Yes, I have implemented change control and showed differences using precontract cost trackers.

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24
Q

You have used RICS guidance notes, what are they? Anything significant about them?

A

A guidance note is not mandatory but is recommended best practice and if I were to be litigated against in court, the court would likely take my side if I followed the guidance note.

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25
Q

You state under level 1 that you understand the components of a cashflow, what are they?
What is a cashflow?

A

A cashflow in this context is for a particular construction project and deals with payments due under a particular project. Cashflows can also be for companies which are completed yearly. Cashflows components will include the project programme and the pricing document to form the amount.

26
Q

What is the purpose of a cashflow?Who produces one and how?

A

For client:

  • To monitor progress against agreed programme
  • To be able to monitor loan payments and withdrawing money from funder
  • To manage resources

For contractor:

  • To monitor subcontractor’s progress against subcontractors
  • To manage resources
27
Q

If monthly valuations are not in line with the projected cashflow what could this imply.
Would you raise this with anyone?

A

This could mean the project is behind programme and an EOT might need to be claimed, or the contractor may be liable for Liquidated damages.
If the contract is ahead of programme, it could be that the contractor is frontloading and the client’s QS would need to assess the works to check this.
Both scenarios would need to be raised with the client and project team.

28
Q

On St Leonard’s Court you produced monthly construction cost reports, what is included in your reports?

A

This included the main project initial costs, approved and unapproved changes, current budget, purchase orders and spent to date. I also included a cashflow.

29
Q

How did cost reporting on the Cellzome CM project differ from normal reporting?

A

This included other project costs including professional fees, taxes, finance fees and legal costs.
It also split the cost report into packages.

30
Q

You state you produced quarterly risk registers on the Cellzome project, what did this involve?
How useful was it?

A

On Cellzome a risk register was made for funding approval including risks such as extensions of time, design discrepancies and changes in quantity. These risks were then assessed on a quarterly basis and where packages were final accounted I agreed with the client to reduce the risks.

31
Q

What is Contingency as referred to in summary of experience, especially in connection with Cellzome project?

A

Contingencies are downside risk estimates that make allowance for the unknown risks associated with a project. The client agreed with myself to have a 10% contingency for unknown risks.

32
Q

How did you come to the contingency amount for this project?

A

This is the level of contingency which is implemented at this stage of the project by client request. Referred to as ‘Gate 2’ where funding is approved, From bench-marking projects at the same design stage I was able to confirm the 10% contingency.

33
Q

What change control procedures have you implemented?

How did they work?

A

I advised to use Aconex whereby there was one common data environment for all changes to be upload and approved by the client. This would send a notification to all relevant parties. I was responsible for recording unapproved and approved changes on the monthly cost report.

34
Q

Tell us about provisional sums. Difference between Defined and Undefined provisional sum?

A

Provisional sums are estimated amounts where there is not enough design information to accurately price the works. Defined provisional sums have enough detail to price in their programme and preliminaries and therefore no EOT would be granted if the provisional sum is applied. Undefined provisional sums would incur additional preliminaries and time.

35
Q

How do you deal with provisional sums in a cost report?

A

Provisional sums are recorded separately to other packages in terms of package value, purchase orders and spend to date.

36
Q

Any quality assurance regarding your cost reports?

A

I make sure that my cost reports are checked to ISO 9001 standards. This includes a standard check, a technical team check and a sign off by an ops director.

37
Q

If a client suggests there is an error in the Cost Report – how would you go about resolving the problem?

A

I would clarify what the error is with the client and then do an inspection of the error. If i find that the client is correct, I will apologize and rectify the error. I will also let the client know of my complaints handling procedure.

38
Q

What is the progressive release method with regards to the contingency pot?

A

The balance of remaining allowance should be progressively reduced on an agreed basis. The release of remaining general risk allowance may be made pro-rata to:

  • % of completion of programme
  • % completion of cost
39
Q

Was the risk register part of the project cost on cellzome?

A

No, the risks register was one for risks which became apparent after the funding approval was achieved. The client wanted to use the 10% contingency to pay for these risks.

40
Q

What is the general risk allowance method?

A

The balance of remaining risk allowance should be maintained throughout the remainder of the project.

41
Q

Which option did you advise on, with regards to the contingency use?

A

I explained the general risk allowance method as well as the progressive release method and that progressive release would mean they could move money out of the project which could better fund other projects. However, this would need to be reviewed at regular intervals which we set up quarterly meetings for.

42
Q

How did you advise if a variation was funded from contingency or from additional funding?

A

I advised the client that the contingency should only be used for items which there was no previous allowance for before the funding approval. If there was an allowance for the item, however there was a change to the amount then this should be funded additionally.

43
Q

You mention that you advised the client on whether variations were funded additionally or from the contingency as part of the risk allowance. How are weather conditions treated under the JCT D and B contract?

A

•Adverse weather conditions are relevant events so would not constitute any change in cost (loss and expense) which a relevant matter would. If there has been an adverse weather condition the change in programme would need to be mentioned in the cost report and the cashflow changed.

44
Q

How did you deal with contractor’s claims?

A

These should be treated as unapproved changes until they have been assessed for scope and cost.

45
Q

What was the change control procedure (on cellzome)?

A

There was a flowchart to show the change procedure including who assesses the change(CRF - unapproved change) (PM initially), the different actions (no further action, rejected, deferred, approved). The change would then be approved by the client who would make their assessment and move onto approved, rejected, deferred or no further action. If approved this would be known as an approved change.

46
Q

What is alucobond cladding?

A

It is a light aluminium composite material consisting of two aluminium cover sheets and a core material usually made of polyethylene. The material is very flexible and fire resistant. Was also a low storey building.
A lightweight solution which is combined with other composite materials.

47
Q

What was your role on the quarterly risk register on cellzome? and what was on the risk register?

A
  • I was to identify risks and price these to give the client an idea if they are to reduce their contingency or not.
  • As more packages were let out and prices were firmed up, the risk on the project reduced.
  • Packages which were not procured were given a 10% risk allowance as when the pre-tender estimate was formed, this was the amount of risk allowed for the cost to fluctuate. This was based on the level of detail in the drawings at the time and on the basis the tender would go out competitively.
48
Q

What would you do if the 10% allowance was not enough for risk?

A

Typically based on the level of information that was used to form the pre-tender estimate, the tender returns would be +-10%.

49
Q

What kind of queries did you have on the query sheet for UCLH?

A

NAME?

50
Q

What contract would you use for CM?

A
  • JCT Construction management agreement (for the CM)

- JCT construction management trade contract (for the trade packages).

51
Q

What contract would you use for MC?

A
  • NEC Option F

- JCT Management Building contract.

52
Q

What is included on a change control form?

A

NAME?

53
Q

How did you price the loss and expense on cellzome?

A
  • Was not in my scope but if it was a JCT contract I would asses for relevant matter.
  • Contractor’s notice for relevant matter
  • Heads of claim (prolongation of preliminaries, extra hire charges for crane usage or site accommodation)
  • Head office overheads
  • Link cause and effect
54
Q

Who decides if a relevant matter is legit?

A

On a DB project this will be the EA.

55
Q

What was your role in the value engineering workshop?

A

NAME?

56
Q

Why do you benchmark?

A

To get an idea and understanding of what a cost will be. Should be carefully considered as factors such as abnormals could influence the cost, as well as location and time.

57
Q

How would you prepare a final account?

A
  • Check the contract procedures for final account including the timescales.
  • Ensure to resolve all the variable costs (changes, loss and expense, liquidated damages, prime costs, dayworks, provisional sums).
  • If there are any disputes which cant be resolved in any other way, the statutory obligation is to go to adjudication.
58
Q

How do you avoid disputes regarding variations?

A

NAME?

59
Q

How do you deal with verbal instructions on JCT (including timescales)?

A

The contractor must confirm the client’s EA team within 7 days of stating the change. The EA must then dissent from the change or it will take place.

60
Q

On 21 bloomsbury - you tracked the ve and prov sums - was there an overall cost document which tracked all relevant costs?

A
61
Q

On SMT you mention the cost report - what was included in the contents page of the cost report?
What different cost budgets did you track?

A