Project Finance Flashcards
(23 cards)
How would you create a cash flow forecast
/ I would need to have access to the construction programme and contract sum analysis in order to populate the cashflow
/ The values associated with each element of construction could be forecasted at times to reflect their installation within the programme
/ I would split the works into different packages as shown on the contract programme and include individual s curves for each package
/ Obtaining drawdown schedules from specialist subcontractors and professional consultants can also assist when populating the cashflow
What is the benefit of a cash flow forecast
/ A cashflow forecast allows the employer to gain an understanding of the financial requirements over the duration of the project duration and setup any funding requirements for the scheme in advance
/ It can also act as a check against valuations and provide an early indication of financial difficulties if the actual expenditure is lagging behind the forecast
What would you include in a financial report
I would look to include:
/ Contract sum total
/ Value of instructed variations
/ value of potential variations
/ ongoing claims
/ provisional sum adjustments
/ the anticipated final account total
/ the total certified sums
What is the purpose of a financial report
/ To report against budgeted values and act as a working cost check on the project budget
/ To give the client an understanding of any savings or additional monies required
/ To report contract progress compared against pre contract predictions
What are variations
/ Alterations or modifications to the design, quality or quantity of the contract works
Why might they arise
/ a change to the specification
/ discrepancies between contract documents
/ discrepancies with statutory requirements
/ errors and omissions
/ deficiencies in employers requirements
what form must architects instructions take
/ it is best practice under the majority of contracts for instructions to be made in writing
/ The QS is not usually authorised to make additions to the contract sum for instructions that are not in written form
What about Oral instructions
/ The validity of oral instructions depends on whether the form of contract being used has the mechanisms for them to be valid
For example within the JCT standard building contract
/ Where the Contract Administrator issues an instruction otherwise than in writing it should have no immediate effect
/ but the contract shall confirm in writing receipt of the verbal instruction in 7 days
/ If the CA does not dissent by notice to the contractor within 7 days then the instruction takes effect
Best practice is to put in writing
Can the contractor object to a variation
/ Some contracts allows the contractor to object to an instruction in special circumstances
/ In the JCT SBC the requirement to comply with a valid instruction is subject to the to certain exceptions
// Where the instruction might affect the efficacy of the design of the Contractors Designed Portion
// Where the instruction might affect compliance with CDM
// Where the instruction infringes patent rights
What can the architect do if the contractor does not comply with an instruction
/ This depends on the form of contract being used however under JCT suites if the contractor does not follow an instruction, the architect will be required to issues a ‘notice to comply’
What 3 methods are there of obtaining a cost for variations under JCT
/ Agreement between the employer and contractor
/ A schedule 2 quotation
/ Valuation by the QS under the valuation rules
What are the Valuation rules under JCT forms of contract
/ If it is of a similar character, quantity and in the same conditions as existing work then the bill should be used
/ if it is of a similar character, but different quantity or conditions, the bill rates should be used as a basis but a fair allowance should take into account the difference
/ If it is not of a similar character, fair rates and prices should be used
What about non measurable work
This would typically be valued by the dayworks procedure based on the cost of labour, plant and materials that have been incurred
What is a star rate
/ A rate that is based on the bill rates but includes a fair allowance
What are ‘fair rates and prices’
/ A market rate
/ A rate based on actual costs
/ A rate in line with current cost data
What are dayworks
The prime cost of all the materials, labour and plant used in carrying out the work along with percentage additions as set out in the contract
What is Quantum Merit
What is deserved
What is loss and expense under JCT forms of contract
Loss and expense reimburses the the contractor for direct loss and expense incurred in carrying out extra works
What are the procedures for claiming loss and expense under JCT
/ As soon as the regular progress of the works is affected, or is likely to be affected they should notify the architect in writing
/ The contractor should submit any further information as requested by the architect
/ The contractor should also submit any further information as requested by the Architect or QS to enable the amount of loss and expense to be ascertained
What are Relevant Matters
Relevant matters are items in a JCT that allow a contractor to claim loss and expense
What are the Relevant Matters
The 5 relevant matters are
/ Variations
/ Instructions
/ Execution of an approximate quantity
/ Suspension by the contractor for non payment
/ Any impediment, prevention or default by the employer
What is the key thing to remember when assessing loss and expense claims
It should be the actual loss incurred by the contractors
What are the common heads of claim in loss and expense applications
/ Prolongation
/ Thickening of preliminaries eg extra costs for variations
/ Disruption causing plant or labour to be unemployed
/ Increases in labour or material costs during delay
/ Head office overheads
/ loss of profit
