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Commercial Management Flashcards

1
Q

how would you manage / monitor overall project costs?

A

Cashflow:
- Updated on a regular basis e.g. following every valuation.
- Monitors actual expenditure vs. projections.
- Allows cost to completion exercised to be carried out:
o Actual + forecasted = Cost to Completion.
o Total – Actual = Remaining fee to spend.
Change Control Register:
- Records cumulative cost of all ‘changes’ on the project.
S-Curves
- Comparison of Baseline, Target & Actual S-Curves.

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2
Q

What is a cashflow and what does it do?

A
  • Cost control tool: Monitors all costs associated with the project: cash inflows & outflows.
  • Tool to identify whether the project is on budget.
  • Breaks down the total cost of the project into individual elements, e.g. fees, build payments, insurance, contingencies, etc.
  • Record of actual payments made to date.
  • Identifies forecasted payments – fee projections.
  • Helps outline financial requirements over course of a project and plan borrowing.
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3
Q

What would you see on a project cashflow?

A

Cumulative payments as a line
Periodic payments as a bar
- Background info:
o Cumulative value (y-axis)/project duration
o Time/payment date (x-axis)
o List of exclusions & assumptions.
- Financial info:
o Broken down into sections: Consultants fees / Contractor’s Valuations / IT / FF&E.
o Total Project Budget. o Expenditure to date. o Retention (3%).
o Inflation & VAT.

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4
Q

What does the HGCRA 1996 aim to do?

A
  1. Improve payment practices, ensure swift payments throughout the supply chain therefore = improving cash flow
  2. Improve dispute resolution – encourage the use of adjudication
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5
Q

What is its effect of the Construction Act on cashflow?

A
  • Provide right to interim, periodic or stage payments.
  • Requirement a mechanism for contracts to say what is required when
  • The payer must provide communication on what they are paying / intends to pay
  • A withholding notice must be given (pay less notice) if they do not intend to pay or pay less
  • Provide a statutory right to refer disputes to adjudication
    The Construction Act 1996 was updated by the Local Democracy Economic Development Construction Act (LDEDCA) 2009.
  • The Act applies to all construction contracts whether in writing or not
  • Requirement for payments to be by instalments where contract is over 45 days.
  • Parties free to agree the amounts for payments and the intervals
  • Every contract must have a mechanism which shows what payments are due and when
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6
Q

What is an S-Curve (standard curve)?

A
  • An S Curve shows cumulative costs e.g. labour costs / valuations against time over the duration of the project.
  • Comprises 3 curves:
    o The Baseline – created prior to the works starting. Shows the proposed allocation of resources and the timing of tasks;
    o The Target – Produced following commencement. Reflects changes to the baseline;
    o The Actual – Tracks actual progress of the project. Comparison to the target curve determines if the project is progressing within budget and on time.
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7
Q

What would payments being behind the curve imply?

A

This would imply that the project was behind programme or under budget.

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8
Q

What would payments being ahead the curve imply?

A

That the project was ahead of programme or the Contractor has been claiming for more than it was due/ ahead of when it was due.

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9
Q

What is a Valuation?

A

A detailed breakdown of the works and provides an appraisal of the cost of the works carried out to date.
Pre-cursor to issuing an Interim Certificate.

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10
Q

What is included in an interim valuation?

A

The valuation reflects works / orders completed and consist of:

  • Preliminaries;
  • Measured work;
  • Variations;
  • Provisional Sums
  • Retention.
  • Materials on-site;
  • Materials off-site (vesting certificates req);
  • Loss & expense;
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11
Q

What can you tell me about the valuation mechanisms in a JCT contract?

A

Alternative A – Stage Payments:
- Contractor applies for payment at agreed intervals (stages).
- The stages and their values are set out in the contract particulars.
- The stages are usually related to the completion of significant construction items e.g. substructure.
- There is no role for a QS under this option in DB 11 – it is a method of valuing the works that an architect / CoW could manage
- Payment is 97% of:
o cumulative value at the end of the relevant stage.
o valuation of any changes within stage.
o acceleration quotation acceptance (only applicable to Alternative A: may be clerical error).
o Fluctuations.
o value of off-site materials if listed.
Alternative B – Periodic Payments:
- Contractor applies for payment at agreed intervals (monthly).
- QS assesses Contractor’s interim valuation – CMT / Architect assesses quality of workmanship.
- Payment is 97% of:
o total value of work properly executed.
o total value of site materials.
o Fluctuations.
o value of off-site materials if listed.
There is an optional provision for advance payment in cl. 4.6 of JCT D&B 11 but this would need to be backed by a bond at additional expense to the Employer.
Other methods for Valuing the works – each form of Contract will specify the valuation method used for the purpose of interim payments.
- Stage payments – common on d+b projects
- Periodic payments -
- Milestone payments – type of stage payment where payment is triggered when a milestone is completed
- Third party certification
- Actual cost / Target cost

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12
Q

The contractor wants payment for materials off-site; what would you do?

A
  • Request a vesting certificate: proof that ownership will transfer to employer on payment.
  • Ensure insurance was in place until the materials arrived at the site.
  • The materials are clearly marked for the site and set apart from other materials.
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13
Q

What does a Vesting Certificate do?

A
  • A Vesting Certificate is a document showing proof of ownership of materials being stored off-site. It can describe:
    o Held at the specialist’s works.
    o Intended for delivery to the site.
    o Do not have any ownership problems.
    o Insured.
    o Marked and set aside.
  • It also confirms that the goods or materials will pass into the legal ownership of the designated recipient as soon as the subcontractor receives payment.
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14
Q

What is included in a Payment Certificate?

A 
Date info:
- Date of Certificate.
- Date of Valuation.
- Contract date.
General info:
- Client details – Company, Name, Address.
- Contractor details – Company, Name, Address.
- CA details – Company, Name, Address.
- Address of site.
- Total Contract Sum.
Payment due:
- Gross value.
- Less Retention.
- Less previously certified.
- Amount due (exc. VAT).
Authorisation:
- Director’s signature.
Appendices
- Letter from QS stating recommendation for payment;
- Copy of QS Valuation Certificate;
- Letter from CMP team stating that works to date are to the required quality.
What happens
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15
Q

What happens if the Employer pays the Contractor late?

A

They must reimburse the interest.

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16
Q

What do you understand about the Fair Payment Campaign?

A
  • The Fair Payment Campaign is an initiative by the National Specialist Contractors Council (NSCC) to reduce the use of retentions, ensure prompt payment periods of 30 days or less and promote the use of Project Bank Accounts.
  • Designed to improve payment practices within the Construction Industry.
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17
Q

What do you think of Project Bank Accounts?

A
  • I believe they are a positive idea as they prevent subcontractors having to wait for main contractors to process their payment, instead receiving it directly through a specific bank account.
  • Clients save money also as sub-contractors can now in theory offer more cost-effective bids knowing that their cash flow will remain constant.
  • Government drive to implement them.
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18
Q

What are the key drivers that influence the financial level of Contractor’s prelims?

A
  • Length of contract.
  • Location – accessibility, space restrictions, accommodation possibilities.
  • Type of project – new build / fit-out, tower / single-storey.
  • Size of project.
  • Need for temporary works.
  • Need for security.
  • Parallel or sequenced working.
  • Sectional completion.
  • Level of Contractor’s design works
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19
Q

What is a Loss & Expense claim?

A

A claim by a contractor against direct loss and / or expense as a result of the progress of the works on-site being materially affected by relevant matters for which the client is responsible:

  • Failure to give the contractor possession of the site; Failure to give the contractor access to / from site;
  • Delays in receiving instructions;
  • Failure by the client to supply goods or materials; Issues relating to CDM.
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20
Q

What is a cost plan and what does it do?

A
  • Breaks down the total cost of the project into individual elements;
  • Reports on all costs associated with the project;
  • Breaks down the total cost of the project into individual elements in order for a contract sum to be identified.
  • Defines contract sum;
  • Identifies potential savings / required extras.
  • Tracks tenders – allows comparison, tenders analysed against budget.
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21
Q

What is the content of a Cost Plan?

A 
Executive Summary
- AECOM role – to report on the significant movements in construction cost associated with the changes on the project.
- Market conditions - the general economic decline has had a significant effect on the UK construction market, leading to a downward pressure on tender prices and reduced activity in the commercial market, increase in raw materials and energy costs.
- Total estimated construction cost.
- Summary in the movement of cost during the reporting period e.g. increases as a result of change; decreases as a result of Value Engineering exercises.
- Risk Management update – Risk workshops have been held at various stages throughout the project
& it is essential that the team review the principal commercial risks to the project and continue to actively manage the risks to avoid and mitigate them during the subsequent Phases.
- The Risk Register will be continuously updated throughout the project.
Summary of Cost Plan (£ allocated to each)
- Service Diversions.
- Construction.
- M&E.
- Fit out.
- External Works.
- FF&E.
- Total.
Detailed Summary (£ allocated to each)
- Service Diversions
o Ground Excavation.
o Gas.
o Water.
o Electricity.
o IT&S.
- Construction
o Substructure.
o Superstructure – lower floors, upper floors, roof, stairs, external walls, internal walls, etc.
- M&E
o HVAC.
o Plant.
o Lifts.
o Comms / IT.
- Fit out
o Wall finishes.
o Floor finishes. o Ceiling finishes. o Toilet fit out.
- External Works
o Landscaping.
- FF&E
o Furniture.
o Vending machines.
- Total.
Basis & Assumptions. Exclusions
- VAT, building insurance, inflation.
Risks & Opportunities Appendices
- Procurement strategy summary.
- Risk Register.
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22
Q

How can a cost report help to monitor & control the project budget?

A
  • It tracks all issues relating to cost on the project:
    o Budget, forecast cost, expenditure to date.
    o Remaining expenditure for all areas of the project such as consultant fees, contractor valuations, surveys, FM costs, in addition to Variations / Changes (approved & unapproved) and Key Risks.
  • Identifies Final Account – outturn costs vs client initial expectations.
  • Life cycle costing – total cost of a building from craAecome to grave.
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23
Q

How do you assess whether a project is on budget?

A
  • Based on forecast transactions: Actual + forecast = Total Expenditure.
  • Based on total: Total – Expenditure to date = cost to complete.
  • Maintain updated cashflow (CATO = computer software for financial monitoring & forecasting)
  • Cost reconciliation exercises.
  • Use of S-Curves – shows cumulative costs / labour hours against time.
    o Baseline – sets proposed time frame & budget.
    o Target – Revised in accordance with the baseline.
    o Actual – True reflection of expenditure against time.
  • Use of software e.g. Apic
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24
Q

What cost to completion exercises are you familiar with?

A
  1. Actual + cost to complete = Total.
  2. Total – Actual = Cost to complete.
  3. Cashflow adjusted after each valuation to reflect actual.
  4. APIC – cost to complete computer software – provides real time project info.
25
Q

How can design and construction processes impact project costs?

A
  • Design complexity (bespoke detailing).
  • Variations.
  • Proportion of risk allocation.
  • Contractor design portions (risk / PI).
  • Contract type – lump sum / target / reimbursement / remeasurement.
  • Legislation / planning obligations e.g. Building Regulations & Section 106 conditions.
  • VAT / Capital allowances.
  • Value engineering.
  • Construction methods – prefabricated e.g. modular, bespoke components, concrete vs. steel, level of skill required.
  • Use of BIM: start up costs.
26
Q

What do you mean by ‘Estimate at Completion?

A
  • It is an estimate of the internal cost to completion, comparing the project staff costs (salaries, expenses) against the outstanding fee drawdown and invoiced fees to show the gross profitability of a project.
27
Q

What would you do if only 60% of the project was complete but 80% of the fee had been spent?

A
  • If project requirements had increased (services, scope, value etc) then I would request further fees from the Client.
  • If the scope of the project/services had not increased and I had a good relationship with the Client, I would ask if there was anything he could do to help us out, that we had made a mistake in calculating the fee proposal.
  • However, if none of the previous could not be achieved, I would accept that the original proposal was a mistake and ensure we got it right the next time.
  • At no point would I reduce the level of service originally offered.
28
Q

How would you approach requesting additional fee from a Client?

A
  • I would define where the scope of the project or service has increased and communicate these variations to the Client together with an estimate of additional fee required to carry out the service in order to gain a verbal agreement.
  • I would then follow this up with a letter which confirmed the updated terms & conditions, fee & schedule of services.
29
Q

Can you tell me what a Disruption Claim is?

A

It’s the prolonged negotiation of a Loss & Expense claim past Practical Completion with heads of claim including:

  • Prolongation of Preliminaries Costs.
  • Disruption.
  • Fluctuations in Cost of Labour, Materials or Plant.
  • Increased Insurances, Bond, etc.
  • Prolonged Head Office Costs.
  • Finance Charges.
30
Q

How can you protect the Client from the insolvency of a Contractor?

A

Prior to insolvency:
- Consider the structure of the company and if a PCG can be obtained. If no Parent Company, obtain a performance bond.
- Conduct a credit check e.g. Dun & Bradstreet / Experian.
- Obtain references and observe if there are any industry rumours about impending insolvency.
- Oblige the Contractor to obtain collateral warranties from sub-contractors with appropriate step-in rights to allow the Employer recourse for any defects.
- Open a specific Project bank account to safeguard money.
On insolvency:
- Discuss mutually beneficial options to complete the Contract with the insolvency practitioner without resorting to termination.
- If no viable option, terminate the Contract and pay no further sums.
- Secure the buildings site.
- Review consultant and sub-contractor agreements for any payment obligations.
- Retender the project, retaining existing sub-contractors where possible.

31
Q

What is a performance bond and do I need one?

A
  • Performance bonds have become increasingly important in the current climate, as they may provide a way of recovering some of your costs if a contractor or subcontractor becomes insolvent.
  • These bonds are issued by banks or insurance companies, and the cost of obtaining one is normally included within the contract sum. They provide a pot of money that can be used to cover the additional costs of getting someone to finish the job. The amount that can be claimed is generally capped at a fixed amount (normally 10% of the contract sum) and the bond will have an expiry date – usually 12 months after the date of practical completion.
    Most common form in the UK is the Association of British Insurers Model Form of Guarantee Bond.
32
Q

When can I call on my bond?

A
  • Performance bonds can only be called when the contractor has “breached” the building contract, as opposed to “on demand” bonds which can be called at any time, regardless of fault.
33
Q

How can you protect the Client from the insolvency of a Consultant?

A
  • Employers must ensure that consultant appointments contain a robust ‘termination at will’ clause so they can terminate the appointment immediately.
  • The appointment should also allow for important rights, such as copyright licence, and the provision of all design documents (unfettered by any dispute over unpaid fees) to continue beyond termination.
  • One other practical point is that consultant appointments should contain a comprehensive payment schedule rather than just a single fee for the whole project.
  • Employers should liaise with their project managers to ensure that all payment requests are in line with that agreed in the consultants’ appointments, as they do not want to find that they have paid an insolvent consultant for services that have not been carried out, especially as it is unlikely they will recover the overpaid fees.
  • Use a project bank account.
34
Q

What is a Purchase Order?

A

A PO is a commercial document issued by a buyer to a seller.

  • Consultant / supplier submits a quotation outlining their services over a defined period;
  • PM obtains recommendation from appropriate consultant / cost manager and issues to client along with quote for approval;
  • Client arranges for a PO to be raised;
  • Sending a purchase order to a supplier constitutes a legal offer to buy product / service;
  • Acceptance of a purchase order by a seller usually forms a contract between the buyer and seller, so no contract may exist until the purchase order is accepted.
35
Q

What is Value Management?

A
  • Value Management is concerned with maintaining a balance between the needs of stakeholders and the resources needed.
36
Q

What is Value Engineering?

A
  • Value Engineering is an explicit procedure designed to seek optimum value.
37
Q

When do Value Management & Value Engineering processes take place?

A

Value Management:
RIBA Stage 1: Appraisal – Client defines business needs & strategy.
Brief – Identify client needs & wants (weighted for importance).
Value Engineering:
RIBA Stage 2: Concept – Selects best value options after development (weighted on performance). RIBA Stage 3: Developed Design – Optimises functionality for best cost.
RIBA Stage 4: Technical Design & Production Drawings – Remove unnecessary costs. RIBA Stage 5: Construction – Problem resolution, adopt efficient ways of working.

38
Q

What is the process of Value Management?

A
  • Study Plan produced to identify overall strategy and timings to deliver:
    -agreed objectives.
    -Identifies project issues, constraints,
    -study scope and objectives, project stakeholders to be involved,
    -data gathering assignments, workshops and action plan – the study plan is updated throughout the process.
  • Information phase - Stage 1:
    o Scope & objectives agreed.
    o Nominated team members present information on project background, critical constraints, design proposals & costs.
  • Functional Analysis – Stage 1:
    o Project objectives are brainstormed.
    o Identify client needs & wants.
  • Study Plan produced to identify overall strategy & timings to deliver agreed objectives. Identifies project issues, constraints, study scope & objectives, project stakeholders to be involved, data gathering assignments, workshops & action plan – the study plan is updated throughout the process.
  • Information phase - Stage 1:
    o Scope & objectives agreed.
    o Nominated team members present information on project background, critical constraints, design proposals & costs.
  • Functional Analysis – Stage 1:
    o Project objectives are brainstormed.
    o Identify client needs & wants.
39
Q

What do you mean by Value Engineering?

A
  • The act of evaluating the function, cost and objectives of a project and its elements with a view to increasing the margin between cost and revenue.
  • Used to determine the best design alternatives for Projects.
  • Used to improve programme, quality, reliability, customer satisfaction and reduce risk.
40
Q

What is Whole Life Costing?

A
  • The costs of acquiring, designing, constructing, operating, maintaining and disposing a building over its lifespan.
41
Q

How is it different from Lifecycle Costing?

A
  • Lifecycle Costing costs individual elements over a project’s lifespan such as repair, maintenance, cleaning or decorating.
  • WLC is the combination of these individual elements together with capital costs to give a holistic estimate.
42
Q

Can you tell me about Whole Life Costing?

A
  • WLC is an exercise which assesses the cost & revenue of a building through its lifecycle, including acquisition, design, construction, materials, maintenance, utilities, decommissioning & demolition.
  • Can be applied to the whole building as well as individual components e.g. the HVAC system.
  • Carried out for feasibility studies to appraise different options / VfM criteria / affordability.
  • Ensures that a maintenance & operation strategy is in place & that consideration is given to the future requirements & functioning of the building.
  • Provides feedback on actual operating / running costs.
  • PFI Schemes require submission of lifecycle assessment as part of bid.
  • Contributes to BREEAM credits - Gives consideration to energy consumption.
  • AECOM appraise a building over a 60 year period.
43
Q

What would you use to carry out a WLC assessment?

A

BCIS – provides high level / generic information.
- In house databases.
- Info sought from consultants:
o Capital costs (e.g. building acquisition) – Cost Manager.
o Facilities cost (e.g. cleaning, maintenance) – FM Consultant.
o Utilities (HVAC system, plant replacement – M&E / FM Consultant.
What

44
Q

What is Capital Expenditure?

A

CAPEX – Funds used by a company to acquire or upgrade physical assets such as property or equipment.
This type of outlay is made by companies to maintain or increase the scope of their operations.

45
Q

What is Operational Expenditure?

A

OPEX – Expenditure a business incurs as a result of performing its normal business operations.
A responsibility that management has is determining how low operating expenses can be reduced without significantly affecting the firm’s ability to compete with its competitors.

46
Q

What is BOT?

A

Build–Operate–Transfer. Build (infrastructure) and operate for a certain period. During this period the private party has responsibility to raise the finance for the project and is entitled to retain all revenues generated by the project. The facility will be then transferred to the public administration at the end of the concession agreement.

47
Q

What is BOOT?

A

Build–Own–Operate–Transfer. Private entity owns the works. During the concession period the private company owns and operates the facility with the prime goal to recover the costs of investment and maintenance while trying to achieve higher margin on project.

48
Q

What is BOO?

A

Build–Own–Operate. Ownership of the project usually remains with the project company for example a mobile phone network. Therefore the private company gets the benefits of any residual value of the project. A BOO scheme involves large amounts of finance and long payback period.

49
Q

What is BLT?

A

Build–Lease–Transfer. Private entity builds a complete project and leases it to the government. The control over the project is transferred from the project owner to a lessee. In other words the ownership remains by the shareholders but operation purposes are leased. After the expiry of the leasing the ownership of the asset and the operational responsibility are transferred to the government at a previously agreed price.

50
Q

What is SPON’S?

A

SPON’S, price books compiled by Davis Langdon, provides the most accurate, detailed and professionally relevant construction price information. Its unique Tender Index, updated through the year, provides an ongoing reality check and adjustment for changing market conditions.
Price books for:
- Architects’ and Builders;
o Approximate estimating – Cost models of building types & approx estimating rates
o Rates of wages – Trades & labour
o Prices for measured works – Major works (structural, cladding, furniture) o Prices for measured works – Minor works (structural, cladding, furniture) o Fees for professional services
- Mechanical and electrical;
- Civil engineering and highway works;
- External works and landscape;

51
Q

What is BCIS?

A

The Building Cost Information Service, known as BCIS, is a leading provider of cost and price information for the UK construction industry. It is a part of the RICS.
BCIS carries out statistical analysis of the UK Construction Industry as a basis for early project cost advice and Elemental Cost Planning. It is a fully operational online service.
The main sections of resource are:
- Construction – used by consultants, and contractors to produce specific estimates for option appraisals, early cost advice, cost planning.
- Maintenance – benchmarking data covering maintenance and operation costs such as cleaning, energy consumption and administrative costs. Provides a sound basis for early life cycle cost advice and the development of life cycle cost plans.
- Rebuilding – rebuilding and reinstatement cost data are an essential resource for many surveyors, valuers and insurance professionals, both in setting insurance premiums and calculating depreciated replacement cost valuations;
- Consultancy – services include measuring price movement, benchmarking, market research, statistical analysis, forecasting and impact studies.

52
Q

What components make up the costs of a project to the contractor?

A
  • Prelims (site setup, plant, materials, labour, profit & overheads)
  • Substructure:
    o Groundworks. o Foundations. o Basements.
  • Superstructure:
    o Upper floor components.
    o Concrete.
    o Steel.
    o Wall materials.
    o Flooring materials. o Windows & doors. o Curtain walling.
    o Stairs.
    o Lifts.
    o M&E components – trunking, cabling.
    o Suspended ceilings.
    o Raised floors.
  • Fit-out:
    o Finishes – walls, ceilings.
    o Partition walls.
    o Furniture & fittings.
    o Carpets.
  • M&E:
    o HVAC.
    o Lifts.
    o Plant.
  • Infrastructure – services, waste.
  • Insurance (employers, liability, PI).
  • Fees – professional, planning, legal site investigations, surveys.
  • Contingency.
  • Provisional sums – required works than cannot be sufficiently designed / specified at the outset.
  • Prime cost sums – allowance calculated by cost consultant for supply of work / materials to be provided by the contractor.
53
Q

What are Prime Cost sums?

A

A Prime Cost Sum (sometimes called a PC sum) is an allowance usually calculated by the cost consultant for the supply of work or materials to be provided by a sub-contractor or supplier that will be nominated by the client. The allowance is exclusive of any profit mark up or attendance by the main contractor, only delivery charge.
Historically nominated sub-contractors or suppliers were selected prior to the appointment of a main contractor because:
- Long lead items where design and manufacturing times could not wait for appointment of a main contractor.
- Client directly orders a preferred piece of equipment on which design is to be based.
It should be noted that courts have generally taken the view that risk in relation to the performance of a nominated sub-contractor lies with the client and not the contractor. This means that delay to the overall programme caused by a nominated sub-contractor can lead to a claim for extension of time under the main contract and entitlement to consequential costs.
Prime Cost Sums should not be confused with provisional sums which are allowances for specific elements of the works not yet defined in enough detail for contractors to price.

54
Q

How can a sub-contractor be financially managed?

A
  • Rigorous payment process – interim valuations – payment certificate.
  • Stage payments.
  • Retention.
  • Use of cashflows to forecast future payments.
55
Q

What has been your involvement in Commercial Management procedures?

A
  • Production of Payment Certificates for director signature for Contractor Valuations;
  • Implementation of a Consultant Payment process (indicated within PEP);
  • Monitoring of Consultant Payments against fee drawdown schedule;
  • Inclusion of a financial summary update in monthly progress (flash) report indicating original budget, forecast cost and variance;
  • Managed Change Control process; both approved, pending and forecasted, and assisted in the negotiation of variation costs;
  • Over view role monitoring Client Direct Orders, ensuring PO’s were raised and invoices paid;
  • Participation in Value Engineering workshops.
56
Q

How can a cost plan help to monitor & control the project budget?

A
  • Tracks all issues relating to cost
  • Budget, forecast cost, expenditure to date,
  • Remaining expenditure from all areas of the project: consultant fees, construction costs, FM costs etc.
  • Changes (unapproved and approved)
57
Q

Why are cashflows important to Contractors?

A
  • Lifeblood of any business
  • Payment terms mean that you are paid in arrears
  • Need for prompt payment
58
Q

How can an S-curve be used to manage expenditure?

A

Maps out expenditure – see what needs to be paid and when.

Forecast payments - financial requirements across a project

59
Q

How would you go about undertaking financial due diligence of a Contractor?

A
  • Why: To protect the Client.
  • Credit check report – identify % risk of going insolvent
  • Financial company reports
  • Consider the structure of the company – can a PCG be obtained?
  • Request a Performance Bond
  • Ask the contractor to obtain collateral warranties from sub-contractors with appropriate step in rights (if contractor goes insolvent), the Client then has a recourse back to sub-contractors if there were to be defective works.

QS (20 decks)

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