Project Finance Flashcards
You have mentioned interim payments, can you please explain the timescales for payments with regard JCT (standard and D&B)
No less than 7 days before due date- MC issue valuation (D&B - Val is up to due date)
0 days - Due date
+5 days - CA Issue payment cert
+ 9 days - Client issue a pay less notice
+14 days - Final date for payment
What is a provisional sum
An allowance included for:
* Not sufficiently defined, designed or detailed to allow accurate costing
* Work that employer may / may not want carried out
What is the importance of a cash flow forecast?
- Gain understanding of financial requirements
- Check against valuations
- Plan expenditure
What is the purpose of providing clients with financial statements?
- Provide financial overview for client
- Inform likely outturn cost of project
- Understand potential savings / additional funds
What are the JCT Standard Form ‘Valuation Rules’?
Contract Rates: where work is of similar ‘character’ to work in the original Contract Documents then the valuation of the variation shall be consistent with rates, prices or amounts of work in the proceed document.
Fair Rates and Prices: Where work is not of a similar ‘character’ then it should be valued at ‘fair rates and prices’.
Dayworks: Method of valuing work which cannot properly be valued by measurement.
Considerations when advising client on Cashflow
- Holidays (eg winter / xmas)
- Retention (end of defect period)
- Certification period
- Payment period
- Sectional completion / Partial possession (Retention)
- Risk
- Prov sums
Reasons for variance in Cashflow
Lower
- Site conditions
- Adverse weather
- Programme issues
- Various delays
Higher
- Front end loading
- Variations
- Ahead of programme
- Distressed contractor
- Cashflow not accurate
What would you include in a cashflow in addition to the direct cost of the works?
Retention
Variations
Prov Sums
VAT (maybe but complicated)
Materials on site
What would you omit in a cashflow
Anything as long as noted to the client
VAT
Materials off site
Effect of Loss and Expense Claims on Cashflow
- Update for best and worse case LOE additions
- May include EoT if necessary
- Update for when claim will be paid
Effect of Liquidated Damages on Cashflow
- Dont include until agreed with contractor
- Doesnt act as saving as it is genuine loss client has received - balances out
Effect of procurement route on cashflow
Traditional
- Separate construction costs from design fees and risk allowances
Design and Build
- Include element of design fees and risk allowance into construction costs
Why do you think a cash flow forms an S’Curve?
Enabling works cost little then bigger packages such as steel and superstructure, costs then reduce towards end for finishes and fit out.
What is change control procedure JCT
- Contractor notified of change
- Contractor issues variation
- QS to review
- 7 days to notify if not agreeable, if is then CA instructs
What are the JCT timescales for submitting a Final Account
- Contractor should submit by maximum 6 month
- Final account should be agreed in 3 months following issue
What should be issued with final accounts
Substantiation to variation figures
Sub contractor quotes
Daywork sheets
Loss and expense claims with build up
Build up of fluctuations
How does NEC deal with provisional sums
- Unamended NEC doesnt provide use of prov sums
- NEC approach - if unclear and price cant be provided, item excluded until defined
Can contractor claim additional prelims or EOT when firming provisional sums
No, if defined it should have been allowed for in programme and prelims
Contractor has made large and in your opinion unrealistic claim for L&E, how would you deal with it
- Highlight concern with figure submitted
- Assume CA has agreed claim is valid, carry out due diligence checks and assess
- Update client regularly until resolved
Who prepares Final Account
Traditional QS
D&B EA
Procedure for agreeing final account
- QS to visit site to evaluate if required
- Once prepared, QS sends all details and supporting evidence to MC
- Disagreements to be discussed and negotiated
- Both parties to sign summary to show agreement
What is cash flow projection
Shows predicted flow of cash in and out of project
What is pay less notice
Gives paying party right to pay less
