Flashcards in Project Financial Control and Reporting Deck (58)
What is the purpose of a cost report?
To inform the client of the likely out turn of cost for a construction project.
This can empower the client to make changes/secure funding/mitigate forecasted costs.
What will a cost report include?
- All costs incurred at the date of the report that are known and can be accurately valued
- All costs incurred that are known and can be accurately estimated
- Forecast of costs that can be reasonably foreseen and estimated
- Risk allowances necessary as can be reasonably foreseen
How often should a cost report be submitted?
On a regular and frequent basis, e.g. once a month.
What sub sections would you expect in a CONSTRUCTION cost report for a lump sum contract?
- Contract Sum
- Adjustments to variables (PSUMS etc)
- Adjustment of variations
- Adjustment of fluctuations
- Claims for loss and expense
- Adjustment for risk allowance
Where can you find information on cost reporting?
RICS Guidance Note - Cost Reporting 1st Edition 2015
What sub sections would you expect in a PROJECT cost report?
- Construction costs
- Professional fees
- Statutory fees and charges
- Third-party costs
- Direct works costs
- Land costs
- Agency costs
- Finance costs
- Legal fees
What items in a contract sum can affect the outturn of the final account?
- Undefined PSUMs
- Defined PSUMs
- Provisional quantities
- Prime cost sums
- Daywork allowances
- Contract instructions
- Anticipated instructions/early warnings
- Loss and expense
- Risk allowances
Who should the cost report be distributed to?
- QS must take instruction from the client. It is confidential information.
- If Contractor had a copy, it could jeopardise the client's bargaining position.
How should PSUM/Prime Costs/Daywork allowances/risk allowances be valued in a cost report at the project's outset?
They should be reported at 100% of the amount defined in the Contract Sum.
What is loss and expense?
Where the contractor is entitled to be reimbursed by the client for loss and expense.
How should loss and expense be reported in JCT SBC?
Separate to the variations.
What is a final account?
The conclusion of the contract sum including all adjustments.
Signifies the agreed value the Employer will pay the Contractor.
Will a final account typically include VAT, interest on overdue payments, LADs, or loss and expense?
Loss and expense YES
LADs, VAT and interest NO
In JCT DB 2011 contract, which clause refers to the final account process?
What is a rolling final account?
- Where all instructions and cost effects are agreed up to the point of the latest financial report
- Final account statement if works were to complete with no further changes
When does preparation of a final account occur?
Throughout the contract period
Can provisional sums be expended without issuing a contract instruction?
What is change control?
The administrative process that implements the contract mechanism for instructing change.
MUST adhere to contract requirements for notification & approval of change
How would you structure a final account?
No firm defined format, but an example would be:
1. Contract Sum (CSA of BoQ)
2. Variable costs (PSUMS, PC Sums, Daywork allowances)
3. Variations/Contract Instructions
4. Loss and expense
6. Risk allowance
At final account, must all variations be instructed?
All changes should have a contract instruction, but it is not uncommon at final account stage for some variations to not have received a formal instruction still.
It is good practice to ensure the architect/CA are aware of all variations.
What is the final certificate?
After the defects liability period is over, the final certificate is issued by the CA allowing the release of the remaining retention monies.
Final Account must be agreed before final certificate.
When does half retention get released?
Half of the retention should be released upon practical completion in most standard contract forms.
What happens to the retention release if the final account has not been agreed at PC?
The employer is entitled to release half retention only up to the amount agreed thus far.
Another payment certificate may be issued once FA is agreed.
What happens if the FA is not agreed after the DLP is over with regards to retention?
The employer is entitled to release full retention up to the amount that has been agreed thus far.
What happens if the contractor does not fix the defects during the DLP?
Most standard forms of contract allow the Employer to use retention money to employ a different Contractor to fix the defect.
The Contractor is allowed to rectify the issue themselves first, and usually this is defined by a timescale after notification by the CA.
What are patent defects?
Can be discovered by reasonable inspection
What are latent defects?
Cannot be discovered by reasonable inspection
What are contra charges?
Where the Employer recovers costs from the Contractor that the Contractor has caused the Employer to incur.
What would you do if there were 20 outstanding variations that were not instructed but agreed during the final account negotiation?
Issue an instruction wrapping up all of these outstanding works, with the instruction listing each variation as a sub-section/bullet point