Commercial management

Question 1

What is your understanding of the components that make the cost of the project to a contractor?

Answer 1

Project cost to a contractor includes direct costs (labor, materials, plant), indirect costs (site overheads, preliminaries), and profit margin.

Question 2

What do you understand by the term working estimate?

Answer 2

A working estimate is a detailed cost forecast used during design development to control and guide project expenditure.

Question 3

What are the key components of a CVR report in respect to cost/value to date?

Answer 3

Cost/value to date includes all actual costs incurred plus valuations of work completed but not yet paid.

Question 4

What are the key components of a CVR report in respect to cost/value to complete?

Answer 4

Cost/value to complete estimates the remaining costs needed to finish the project based on current projections.

Question 5

Explain the CVR process.

Answer 5

The CVR process is a profit and loss statement that measures a projects costs and value during a specified accounting period, which is typically a month. This determines the profitability of a project at a given point in time during the project life cycle. From this, you can assess whether the project is over or under performing against budget.

Question 6

What do you understand by the term liability?

Answer 6

A liability is a sum of money owed to another company.

Question 7

How does a liability differ from cost?

Answer 7

Liabilities are in relation to monies owed, whereas cost relates to money spent.

Question 8

What would you consider before constructing a project cash flow forecast?

Answer 8

Step 1: Calculate income by using the agreed payment schedule set out in the contract

Step 2: Plot when income will be received and map onto a graph

Step 3: For outgoings I would utilise the project’s cost ledger and ensure that any long lead time items are accounted for

Question 9

Why is the construction of a cash flow forecast so important?

Answer 9

Highlights the movement of income and expenditure into and out of a business over time.

Allows client to identify the funding requirements of a project and the projected flow of cash.

Question 10

How is wastage calculated?

Answer 10

Wastage is typically calculated as a percentage of material quantities based on historical data and site conditions.

Question 11

What insurances are required under a contract? How are they included in a tender?

Answer 11

Common insurances include employer’s liability, public liability, and contractor’s all-risk, specified in contract documents and costed in tenders.

Question 12

What do you understand by the term project budget?

Answer 12

The project budget is the approved financial plan setting the total expenditure limits for the project.

Question 13

How does the project budget differ from the tender budget?

Answer 13

The tender budget is the estimated cost submitted to win the contract, often refined into the project budget post-award.

Question 14

What current challenges is Covid and/or Brexit bringing to Commercial Management?

Answer 14

Covid and Brexit disrupt supply chains, delay projects, and create uncertainty in pricing, procurement, and contract terms.

Question 15

Level 2

ED1SON Alliance Reporting on client certification

How did you ensure your site visits were effectively aligned with programme progress for accurate forecasting?

Answer 15

I would attendance site in the final week of every month to ascertain the activities completed on site.

When attending site I printed a copy of the latest programme and activity schedule to assess the relevant activities.

Question 16

Level 2

ED1SON Alliance Reporting on client certification

In what format did you present your reports to senior management?

Answer 16

I completed an excel spreadsheet including figures such as period application value, cumulative applied value and expected certification values.

I included narrative against any deltas between applied and expected certification values.

Question 17

Level 2

ED1SON Alliance Reporting on client certification

How did you tailor them for clarity and decision-making?

Answer 17

When reporting on the level of certification I included concise summary of events based on factual information.

Question 18

Level 2

ED1SON Alliance Reporting on client certification

What specific indicators did you use to assess the risk of incomplete work affecting client certification?

Answer 18

Due to the fact that the majority of my projects were option A, I used work completion percentages to ascertain whether the activity would be 100% completion by the assessment date, and therefore included within the Client’s assessment.

Question 19

Level 2

ED1SON Alliance Reporting on client certification

How did you coordinate with the site or project team to validate information included in your payment applications?

Answer 19

I chaired regular meetings with my construction manager and assistant QS to cross-check claimed activities against progress on site.

For any discrepancies I consulted my construction manager to understand the reasons why.

Question 20

Level 2

ED1SON Alliance Reporting on client certification

What was your approach to managing aged debt to prevent negative impact on commercial forecasting

Answer 20

I kept an up to date register of any aged debt and liaised with the Client’s accounts department on a regular basis to understand when the BACS transfer would be made to my employer.

I obtained narratives from which I was able to advise senior management on the status of the aged debt and when it would be received.

Question 21

Level 2

ED1SON Alliance
Welfare cabin purchase

1. What sources did you use to gather cost data for comparing hire vs purchase of welfare cabins?

Answer 21

I used hire rates from the existing supplier contract and obtained purchase quotations from approved suppliers. I also referenced historical project data to validate costs.

Question 22

Level 2

ED1SON Alliance
Welfare cabin purchase

2. How did you ensure your analysis of overheads (e.g. cleaning and maintenance) was comprehensive and accurate?

Answer 22

I identified all ancillary costs like cleaning and maintenance by consulting site teams and reviewing past expenditure, applying contingencies where needed to capture all overheads.

Question 23

Level 2

ED1SON Alliance
Welfare cabin purchase

3. How did you structure the report to senior management to justify your advice clearly?

Answer 23

The report included an executive summary, detailed cost comparison with overheads, risk/benefit analysis, and a clear recommendation supported by data.

Question 24

Level 2

ED1SON Alliance
Welfare cabin purchase

4. What factors did you consider when assessing the long-term value of purchasing welfare cabins?

Answer 24

I considered total ownership costs, maintenance, residual value and operational costs/.

Question 25

Level 2 ED1SON Alliance Welfare cabin purchase 5. How did you monitor and verify that the projected savings from the purchase were realised during the programme?

Answer 25

I tracked actual costs versus forecast to assess whether cost savings were being realised.

Question 26

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 1. What indicators led you to challenge the accuracy of the margin reported in the CVR?

Answer 26

I identified that the project’s reported margin was significantly higher than the margin shown in my outturn cost forecast, indicating potential overstatement of profitability.

Question 27

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 2. How did you determine that it warranted further investigation?

Answer 27

The information reported within CVR was key financial information that was fed into the wider business. I knew that over-reporting the profit margin would reduce the robustness of my CVR reporting. It was on this basis that I deemed further investigation necessary into the project's cost ledger.

Question 28

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 * What specific options did you consider for reconciling the unrecognised liability?

Answer 28

I considered whether it was appropriate to produce a new CVR template, however when I cross referenced the project's cost ledger, it was clear that the liability was not recognised within the accounting system.

Question 29

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 Why did you advise a cost accrual rather than adjusting the forecast or reclassifying costs in another way?

Answer 29

I advised a cost accrual on the basis that the liability was due for payment and therefore needed to be recognised within the cost element of my CVR report to avoid over-inflating the margin position. By making a cost accrual, I was able to categorise the accrual as 'pending liability' to ensure accuracy within my CVR reporting. Adjusting the forecast would not have been appropriate on the basis that the liability was genuine and due for payment.

Question 30

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 * How did you assess the need for financial accuracy against reporting pressures or commercial targets during your advice?

Answer 30

Although there were budgetary expectations for the project, it was critical that my CVR report was a true representation of the project's profitability and performance relative to budget, to avoid feeding false information to the business which could be misinterpreted.

Question 31

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 * What assumptions did you make about the timing and certainty of the subcontract liability when forming your advice?

Answer 31

I reviewed the payment certificate to ensure it had been correctly issued and signed by the relevant parties to ensure it was due for payment. From this I was also able to determine the value of the liability due for payment. Furthermore, using the payment conditions outlined in the contract, I identified that the liability was due for payment by the 21st of the current month.

Question 32

Level 3 Tilbury 33kV Rail Fault: Cost Value Reconciliation Liability - £140,000 * How did you ensure that your advice aligned with internal reporting requirements and supported forward-looking decision making?

Answer 32

By making a cost accrual I ensured my financial reporting was reliable and a prudent assessment of the project's profitability. This supported informed decision making based on reliable project reporting.

Question 33

Level 3 West London Growth: Works in Progress (WIP) Recovery – £50,000 What indicators led you to challenge the accuracy of the margin reported in the CVR, and how did you determine that it warranted further investigation?

Answer 33

The profit margin within the CVR report is used to assess the level of profitability or loss against budget. On review of the CVR template, I identified that the CVR position was inflated relative to the profitability margin within the financial year's budget. I recognised that the financial reporting within my CVR report needed to be a prudent assessment of the project's profitability. On this basis, I deemed further investigation as necessary.

Question 34

Level 3 West London Growth: Works in Progress (WIP) Recovery – £50,00 * What specific options did you consider for reconciling the unrecognised liability, and how did you assess their commercial impact?

Answer 34

I considered whether it was appropriate to produce a new CVR template, however when I cross referenced the project's cost ledger, it was clear that the liability was not recognised within the accounting system.

Question 35

Level 3 West London Growth: Works in Progress (WIP) Recovery – £50,00 * Why did you recommend a cost accrual rather than adjusting the forecast or reclassifying costs in another way?

Answer 35

I advised a cost accrual on the basis that the liability was due for payment and therefore needed to be recognised within the cost element of my CVR report to avoid over-inflating the margin position. By making a cost accrual, I was able to categorise the accrual as 'pending liability' to ensure accuracy within my CVR reporting. Adjusting the forecast would not have been appropriate on the basis that the liability was genuine and due for payment.

Question 36

Level 3 West London Growth: Works in Progress (WIP) Recovery – £50,00 * How did you assess the need for financial accuracy against reporting pressures or commercial targets during your advice?

Answer 36

Although there were budgetary expectations for the project, it was critical that my CVR report was a true representation of the project's profitability and performance relative to budget, to avoid feeding false information to the business which could be misinterpreted. By reporting true and correct financial information, I was able

Question 37

Level 3 West London Growth: Works in Progress (WIP) Recovery – £50,00 * What assumptions did you make about the timing and certainty of the subcontract liability when forming your advice?

Answer 37

I assumed that the monies would be paid in accordance with the contractual payment terms and values noted in the payment certificate.