Project Financial Control & Cost Reporting Flashcards
(34 cards)
How would you create a cashflow 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 the 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. - An alternative approach would be to utilise a previous cashflow from a similar scheme or to use
cashflow forecasting software although this may not be as accurat
If your construction budget was £2.5m and proposed construction
period was 25 weeks, would a forecast cashflow expenditure of
£100,000 per week be realistic?
- In reality this would not be very realistic as the cashflow expenditure per week is unlikely to have a flat or regular profile.
- In reality the expenditure is much more likely to have an S-curve profile where at the start of the
scheme, the expenditure per week will be fairly low as the site setup and enabling works are undertaken. - As the scheme progresses, items that are of higher value such as the steel frame and M&E installations will be undertaken. The cost expenditure per week at this stage will be much higher than at the start of the scheme.
- As the scheme draws to a close, minor finishing items such as decoration and cleaning packages will be undertaken again resulting in a lower expenditure cost per week.
What is the benefit of a cashflow 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 within a financial report?
Contract Sum
Variations
Claims
Prov Sums
Aniticipated Final Account
Total Certified Payments
What is the purpose of a financial report?
- report against budgeted values and act as a working cost check on the project budget
- give the client an understanding of any savings or additional monies required
- report contract progress compared against pre-contract forecasts
What are variations?
Alterations or modifications to the design, quality or quantity of the contract works or to the site access or working conditions
Why might variations arise?
- change to specification
- discrepancies between contract documents
- discrepancies between statutory requirements
- errors and omissions
- deficiencies in employer’s requirements
What form must architect instructions take?
- it is best practice to 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 the form of contract being used containing mechanisms to allow them to be valid
- e.g in JCT SBC if the CA issues an instruction other than in writing it has no immediate effect. The contractor shall confirm in writing receipt of verbal instruction within 7 days. If the CA does not disagree by notice to the contractor within 7 days, it shall take effect
- it is always best practice to follow up verbal instructions with written instructions
Can the contractor object to a variation?
- some contracts allow the contractor to object
- In JCT SBC, a contractor could object if it;
1. affects the efficacy of the design of the CD
2. affect the contractor’s compliance with the CDM regs
3. infringe patent rights
4. relates to named specialist and the contractor is unable to enter into a contract with that firm
What can the architect d if the contractor does not comply with an instruction?
- Under JCT suites, if the contractor does not follow an instruction, the architect will be required to issue a ‘notice to comply’ to the contractor
- if Contractor fails to comply, the architect can instruct another party to carry out the work and the contractor will be liable for additional costs incurred
What 3 methods are there for obtaining a cost of variations under JCT form of contract?
Under JCT SBC;
1. agreement between the employer and contractor
2. a schedule 2 quotation
3. valuation by the QS under the valuation rules
What are the time periods for schedule 2 quotations?
- architect should request via issue of an anticipated instruction
- contractor has 7 days to notify that they will not provide one
- if not, they have 21 days to provide the quotation
- architect then has 7 days to confirm in writing the acceptance or rejection
- acceptance is called ‘confirmed acceptance’
What cost des the schedule 2 quotation contain?
- value of the works
- adjustment of time
- money in lieu of direct loss and expense
- fair and reasonable cost of preparing the quotation
What costs 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 are the valuation rules under JCT forms of contract?
- if it is of similar character, quantity and in the same conditions as existing work, then the bill rates should apply
- if it is of similar characters, but different quantity/condition, 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
What are valuation rules for non-measurable work?
This would typically be valued by the dayworks procedure based on the costs of labour, plant and materials that have been incurred.
What is a star rate?
- rate based on the bill rates but includes a fair allowance
- to deviate away from the bill rates there must be a reason as to why the star rate is being adopted
- this may be because the conditions on site for installation are more complicated than first envisaged
What are ‘fair rates and prices’?
- market rates
- rate based on actual costs
- rate in line with current cost data
What are dayworks?
The actual cost of all the materials, labour and plant used in carrying out the work, along with a % addition to each category as set out in the contract
What document should the prime cost be calculated in accordance with?
This should be calculated in accordance with the ‘definition of the prime cost of dayworks carried out under building contracts’ published by RICS
What information is necessary to be able to assess dayworks?
- vouchers showing the amount of time spent on each activity
- names of the workmen
- plant and materials used
- information should be given to the architect or authorised person at the end of the week for verification
Can the QS alter hours which they consider to be excessive on a dayworks sheet that is authorised by the architect?
No the hours recorded and signed off should be maintained within the variation
What would you d if the contractor submitted 10 dayworks sheets to you for payment?
- I would verify with the architect that a relevant variation has occurred and is recorded on an Architects instruction
- I would check to ensure there is no other contractual method of valuing the variation
- providing the instruction is in place and no other mechanism for valuation is available I would seek verification of the hours and materials
