Project Finance Flashcards
(31 cards)
What are the key components that should be included in a comprehensive cost report?
Executive summary
Assumptions and exclusions
Cashflow
Summary of cost
Instructed Variations
Anticipated Variations
Early warnings
Direct works
Provisional Sums
Contingency breakdown
How do you differentiate between a provisional sum and a prime cost sum, and what are the financial control implications of each?
A provisional sum is a cost for an item which is either defined or undefined in the contract.
A prime cost sum is the cost for materials or subcontracted work where the supplier is nominated by the client.
Provisional sums are paid based on the actual work incurred, whereas prime cost sum is the actual cost of the materials provided by the supplier via invoices.
What is a Monte Carlo Simulation?
A statistical method that runs multiple simulations to predict possible outcomes.
How would you create a cashflow forecast?
I would need to have access to the construction programme and contract sum analysis and identify when packages would be bought and split out the values accordingly.
Obtaining drawdown schedules from specialist subcontractors and professional consultants can also assist when populating the cashflow.
What are the valuation rules under JCT Forms of Contract?
There are three rules for measurable work:-
If it is of a similar character, quantity and in the same conditions as existing work, then the bill rates 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 be made to take account of the difference.
If it is not of a similar character, fair rates and prices should be used.
How are non-measurable works valued under the JCT?
This would typically be valued by the dayworks procedure based on the cost of labour, plant and materials that have been incurred.
What is the benefit of a cashflow forecast?
It enables the client to understand the financial requirements of a project over a duration and set up funding requirements in advance.
It can also be used to check against valuations and helps to track the progress of the works on site against the contractor spending.
What are variations?
Addissions, omissions or alterations to the design, quality or quantity of the contract works, site access or working conditions.
Why might a change arise?
Change to specification
Discrepancies between contract documents
Discrepancies with statutory requirements
Errors or omissions in the design
Missing information in the Employer’s Requirements
Can a contractor object to a variation?
Yes, some contracts allow them to object to an instruction in special circumstances, for example,
In the JCT Standard Building Contract, the requirement to comply with a valid instruction is subject to certain exceptions, where,
The instruction might affect the efficacy of the Contractors Design Portions.
The instruction has an impact on the CDM regulations.
Where the instruction relates to a named specialist and the contractor is unable to enter into a contract with that firm.
What can the architect do if the contractor does not comply with an instruction?
This depends on the form of contract,
In the JCT Suites, if the contractor does not follow an instruction then a ‘notice to comply’ will be issued to the contractor.
If the contractor still does not comply, the architect can instruct another party and the contractor will be liable for any additional costs incurred.
What 3 methods are there of obtaining a cost for a variation under the JCT forms of contract?
This depends on the form of contract, for example in a Design and Build,
- Agreement
- Schedule 2 quotation
- QS valuation
What are the time periods for a Schedule 2 quotation under JCT Design and Build?
The contractor has 7 days to notify that they will not provide one,
The contractor must submit their estimate within 14 days of receiving the relevant instruction, unless agreed otherwise,
The client then has 21 days from receipt of the estimate to either accept or negotiate the amount.
What cost does the Schedule 2 quotation contain?
Value of the works
Money incured by direct loss and expense
Fair and reasonable cost of preparing the quotation
Contractors OH&P
What cost is the contractor entitled to if the Schedule 2 quotation is rejected?
The fair and reasonable cost of preparing the quote, as long as the quote itself was fair and reasonable,
What information do you need to assess dayworks?
Time sheets.
Names of the individuals.
Plant and materials used.
What are the procedures for claiming loss and expense under a JCT?
The contractor must make the client aware as soon as they know the loss is likely to be incurred or any other matters which will incur the loss and expense,
They should then submit any information as requested by the QS / Architect to enable the amount of loss and expense to be ascertained,
What is the key thing to remember when assessing loss and expense?
It should be the actual loss incurred by the contractor.
What are the common heads of claim in loss and expense?
Prolongation.
Thickening of preliminaries.
Disruption causing plant or labour to be underemployed.
Increases in labour or material costs during the period of delay.
Head office overheads.
Loss of profit.
Finance charges.
Acceleration costs.
Claim preparation costs.
What 3 methods are there of obtaining a cost for variations under JCT forms of Contract?
Agreement between the parties.
A Schedule 2 quotation.
The Quantity Surveyors valuation.
Explain what an S-curve represents in project cashflow forecasting and what factors might cause actual expenditure to deviate from it.
The S-Curve represents the natural rhythm of how construction projects develop over time with low expenditure in the beginning, to high cost elements (such as structural or M&E works), to costs tapering off as the project nears completion.
How do you differentiate between a provisional sum and a prime cost sum, and what are the financial control implications of each?
A provisional sum is a cost for an item which is either defined or undefined in the contract.
A prime cost sum is the cost for materials or subcontracted work where the supplier is nominated by the client.
Provisional sums are paid based on the actual work incurred, whereas prime cost sum is the actual cost of the materials provided by the supplier via invoices.
What are the fluctuation options under a JCT?
Option A - contributions, such as levies and taxed.
Option B - Labour and material cost fluctuations, including tax changes.
Option C - A formula based on cost indices
What costs does the schedule 2 quotation contain?
- Value of the work.
- Any adjustment of time.
- Money in lieu of direct loss and expense.
- The fair and reasonable cost of preparing the quotation.
