Commercial Management

Question 1

What is commercial management?

Answer 1

Commercial management is the reporting of cash flow, profitability and management of commercial risks

Question 2

What are some of the tools used for commercial management

Answer 2

1. Cost Value Reconciliation
2. Cost to complete
3. Cost plan
4. Value plan
5. Cash flow forecast
6. Risk radar analysis

Question 3

What make up the cost plan?

Answer 3

1. Subcontractor costs
2. Materials
3. Fees
4. Plant
5. Utilities
6. Prelims
7. Risk / contingency

Question 4

What makes up the value plan?

Answer 4

1. The contract value
2. Variations
3. Other incomes
4. Work in progress (WIP)

Question 5

What is WIP

Answer 5

Work in progress is the adjustment for part completed work not yet ready for billing.

Question 6

Give 3 examples of WIP items

Answer 6

Over measure (over claiming - NW)
Under measure (under claiming - PW)
Materials on site

Question 7

What is negative WIP

Answer 7

Negative WIP is work I progress not ready for billing e.g work claimed but not yet completed or materials on site

Question 8

What is positive WIP and why can it be a problem?

Answer 8

Positive WIP is under measure on items which can lead to a negative cash flow balance for the project because of items that have to be paid to the supply chain but not yet claimed

Question 9

Why must cost and value be taken together?

Answer 9

To not show a false margin

Question 10

How do you use a risk register to manage commercial risks

Answer 10

1. Analyse as a team the risks to the project
2. Evaluate them by likelihood and severity
3. Based on that you can attribute risk amounts based on the risks materialising

Question 11

Give an example of when you managed the cash flow of a project

Answer 11

I manage the cash flow on my Bath Road project by doing monthly cash flow forecasts to the client

Question 12

Give an example of how you have managed the profitability of a project

Answer 12

On my Eastbrook studios project I reported to my directors on the subcontractor liabilities spreadsheet which gave a detailed breakdown of the forecasted final account of each package

Question 13

Give an example of where you have managed commercial risk

Answer 13

When I came to Devcon I did a commercial audit of the company and found areas that we were at risk including a lack of detailed subcontracts without back to back amendments which I advised was needed

Question 14

Give an example of where you have worked with other stakeholder to manage commercial elements

Answer 14

On my Bath Road project I attend design team meetings with the designers to make sure that what is being designed is as per the ERs and we are not adding anything unnecessary (eg extra trees)

Question 15

Give an example of where you have advised on the profitability of a project.

Answer 15

On my Onslow mills project I advised using a CVR exercise that although there was profit in the job it had all been taken previously and the job was now costing us due to delays. My advice was to apply for any variations that had not been claimed for to the client as well as an extension of time. I also advised on subcontractors retention not being held.

Question 16

Give an example of where you have advised on cash flow

Answer 16

I advised on my Eastbrook studios project for the M Price package that we should purchase materials direct and reduce payment terms as VolkerFitzpatrick has the cash reserves to do so