Project Finance (Control & Reporting) (Level 3)

Question 1

What are the project finance techniques?

Answer 1

o Budgeting and cost management – utilisation of accurate forecasting
o Cashflow forecasting
o Financial reporting – providing stakeholders with regular updates.
o Risk and change management

Question 2

What is the difference between cost control and cost reporting?

Answer 2

Cost control refers to the process of monitoring, managing, and regulating project costs to ensure that they remain within budgeted limits and align with project objectives.

Cost reporting involves the communication of project cost-related information to relevant stakeholders in a clear, accurate, and timely manner.

Question 3

As a QS what should you be doing for your client?

Answer 3

o C ost planning and budgeting
o V alue engineering
o P rocurement advice
o C ost control and reporting

Question 4

How would the number of variations affect the frequency of reporting?

Answer 4

If the volume of variations on a project is such that cost reporting should be carried out at shorter intervals than set out in the consultant’s appointment, then the quantity surveyor should advise the client and seek instruction.

Question 5

How do you compile a risk register?

Answer 5

o Identify project risks
o Categorise the risks
o Assess impact and likelihood
o Assign risk owner
o Develop mitigation strategies
o Monitor and review

Question 6

How do you quantify risks set out in the risk register?

Answer 6

Cost estimates may be based on historical data, expert judgment, or parametric models to quantify the monetary impact of risks on project budgets and financial performance. You can use qualitative or quantitative assessments.

Question 7

What are the key components of a cost/value reconciliation?

Answer 7

o Actual cost analysis
o Earned value of work done to date analysis
o Forecast to complete for remaining activities.
o Corrective actions and mitigation strategies

Question 8

What is the importance of having a project cash flow forecast?

Answer 8

o Financial planning by estimating the timing and magnitude of cash inflows and outflows.
o Budget management, comparing actual cashflow vs forecasted.
o Mitigate financial risks associated with cashflow mismatches/ funding gaps.
o Supplier management – timely payments

Question 9

How would you define contingency?

Answer 9

As an allowance or provision included in project budgets to cater for unforeseen events, risks, or uncertainties that may impact project costs, schedules, or outcomes.

Question 10

What do you understand to be the difference between prime cost and provisional sums?

Answer 10

Prime cost items are specific materials or goods to be provided by subcontractors or suppliers that are nominated by the client.

While provisional sums are budgetary allowances for works or services that are yet to be fully defined or scoped.

The main difference lies in the responsibility for selecting and purchasing prime cost items (client) versus carrying out works covered by provisional sums (contractor).

Question 11

What current challenges is Covid and/or Brexit bringing to Project Finance?

Answer 11

o Economic uncertainty – funding issues
o Supply chain disruption – imports from EU and COVID restrictions.
o Cost escalation
o Contractual risks

Question 12

How did you prepare the cashflow forecast – what methodology did you use?

Answer 12

• Activity schedule cashflow forecast method.
• Refer to internal financial reporting system for subby payment indication.
• Add the liability to a summary sheet.
• Compare against predicted payments to be made by the client for the inflow.

Question 13

What are the two types of cashflow forecasts?

Answer 13

Forecast of a company (organisational) and forecast for a project

Question 13

As well as reporting risk on the project, how do you manage risk?

Answer 13

During our monthly risk meetings, we discuss current risks and new risks.

We review the current risks and assess their status and whether any additional mitigation is to be implemented.

For new risks we will assess the likelihood and potential impact, the mitigation techniques and further allocatee contingency.

Question 14

How do you compile the forecast cost to complete? How do you assure yourself that it is correct?

Answer 14

o Actual cost data into forecast for review and analysis
o Forecast cost updated in line with programme.
o Update with relevant members to each cost header.

Question 14

How did you manage expected changes in the FTC, how did you ensure you were aware of them?

Answer 14

• Ensure they’re correctly calculated.
• Input into the next FTC revision.
• Clear explanation for the client.
• Apply risk if there is any.

Question 15

How do you assure yourself that your sub-contract liabilities are correct?

Answer 15

o Summary sheet which tracks order value and changes
o Comprares worst case position vs paid to date.
o Based on implemented and unimplemented CE’s for each subcontract.

Question 15

How do you manage risk with your sub-contractors?

Answer 15

o Weekly meetings to discuss programme, commercial and H&S.
o Ensure pre let meetings detail each party’s contractual risk.
o Regular risk reduction meetings if required.

Question 15

Can you explain the types of records you have advised be kept?

Answer 15

o Timesheets of the men on site each day and the activity they were carrying out.
o Any equipment they had on each day.
o Weather and ground conditions.

Question 16

Can you explain the mechanics of the change control register – can you provide examples of how it works and the benefits you have seen since it has been implemented?

Answer 16

o The change control register tracks both early warnings and compensation events. It includes a notified date, the relevant clause, the description and the cost.

o It also includes a section for timely replies. Our period for reply is 21 days in all subcontracts, there is a formula which will indicate when a reply is due and will flash red if it is due in less then 5 days.

The benefits of having such register include:

o Awareness for due replies.
o Can tie both parties into it, making the changes clearer.
o Presentation to senior management.

Question 17

Do you have risk meetings with the client and the rest of the professional team? If so, can you outline your input?

Answer 17

o Bi-weekly risk reduction meetings with the client
o Input the EWN’s from CEMAR into the sheet and talk through with the PM and team.

Question 17

What lessons were learnt from the incidence of a risk occurring that wasn’t on the risk register?

Answer 17

It’s important to have risk in the forefront of the project teams minds with each situation:

o Enhance the risk identification process, including a broader range of stakeholders with wider knowledge on the subject.

o More regular risk reviews with higher risk projects.

o Scenario planning workshops driven by the programme.

Question 18

What was the outcome of the notification to the liner sub-contractor as you advised?

Answer 18

The subcontractor said that they were unavailable to expose the leak themselves and asked us to carry out the works on their behalf. This ended up proving their defect, which they initially disputed.