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Project Finance Level 2 - Coggle Diagram

- - - - Labour issues, safety hazards, brownfield site
    - - Covers any other risk associated with the project. This could include requirements for planning permission to be granted, funding requirements etc.
    - - Building control & other regulatory compliances
    - - Accounts of the likelihood of the employer wanting to change elements on the project
  - - - 1) To provide an overview of the client's current financial commitment
      - 2) To inform the client of the likely outturn cost of the project, including forecasting the outturn cost as a variance against the budget and/or tender sum
      - 3) To give the client an understanding of potential savings or additional monies required
    - - 1) Executive summary
      - 2) Contract sum
      - 3) Instructed variations/compensation events
      - 4) Potential future variations as advanced warnings
      - 5) Status of any claims
      - 6) Cost plan
      - 7) Value engineering options
      - 8) Anticipated final account (forecast)
      - 9) Risk allowances
      - 10) Final account progress
      - 11) Total certified payments
      - 12) Cash flow forecast
      - 13) Recommendations and next steps
    - - Cost - is the total of labour, plant. materials and management deployed in relation to building works
      - Price - is the amount the employer will ultimately pay for the work to be completed
    - - It is a financial report produced at agreed intervals on a project which provides an overview of the client's current financial commitment. The purpose of it is to inform the client of the likely outturn cost of the project, including forecasting the outturn cost as a variance against the budget and/or tender sum. This will give the client an understanding of potential savings or additional monies required
  - - - 1) Designers are aware of the cost implications of their proposals which enables them to arrive at a practical and balanced design
      - 2) Provides Information upon which the employer can make informed commercial decisions
      - 3) The cost plan confirms to the client if the scheme is affordable or not
      - 4) Cost planning places the client in an informed position to make commercial decisions
      - 5) The cost plan can act as a value management tool to ensure the client gets a building which meets their needs, but also represents best value
    - - Preliminaries are typically presented as a weekly rate in developed cost plans; therefore, a programme or at least some high-level dates will be required. The key information usually required is:
        1) Design and tendering period
        2) Start on site date
        3) Construction period
        4) Completion date
        
        What to include in a fee estimate
        
        Consultant Fees
        
        Project and design team
        
        Other specialist consultants
        
        Survey fees
        
        Contractor Fees
        
        Management and staff
        
        Specialist support
        
        Contractor's design management fees
        
        Contractor design team fees
        
        Framework fees
    - - A quantitative allowance set aside as a precaution against risks and future requirements to allow for uncertainty of outcome.
    - - How would you deal with this
        
        2) Identify areas where potential savings can be made, possibly in terms of material specification or re-design
        
        1) Communicate the matter to the client and project team in a clear and concise manner
      - How can the cost manager help control the design to keep the project within budget?
        
        1) Explain to the design team where the cost plan sites against the budget and discuss limitations.
        
        2) Identify and communicate areas of design which may not be economical
        
        3) Regular project risk reviews and ask the design team to focus on mitigating key design risks
        
        4) Explain how changes in the design will impact the cost plan
        
        5) Contribute to value engineering and/or cost saving sessions
      - Why do cost plans run over budget?
        
        1) Ambiguous client brief or changes in the later stages of the project
        
        2) Unrealistic cost estimates
        
        3) Project risk is realised or not properly managed
        
        4) Inadequate management control or processes
        
        5) Uncoordinated design
        
        6) Unknown external factors (Global pandemic)
        
        7) Unsuitable tendering and/or procurement strategy
        
        8) Statutory authority influences such as onerous planning permission conditions
        
        9) Inflation or changing market conditions
  - - - 2) Regular dialogue with the design team and contractor to monitor progress and issues
      - 3) Operate a rigorous payment process
      - 4) Cash flow forecasting
      - 5) Regular cost reporting
      - 6) Manage the expenditure of provisional sums
      - 7) Proactive risk and contingency management
      - 8) Monitor and agree variations/compensation events as they arise
      - 9) Identify and reduce the impact of claims
      - 10) Monitor and mitigate early warnings (NEC)
      - 1) Operate a robust change control procedure
    - - 1) All relevant parties are consulted
      - 2) The change is properly assessed in terms of time, cost and quality or any other impact prior to implementation
      - 3) Once the change is agreed, a record is formed to capture the change
    - - Change control is the process of managing and assessing changes to a project and its procedures. Change controls can give a project manager the information they need to regulate projects and alter them based on changing environments, conditions or requirements.
        
        Typical Change Control Process
        
        Initiation of a request for change - the contractor shall issue a change request form (CRF)
        
        This will issued to the Client PM for review
        
        Each CRF will detail any cost, programme and design changes, as well as the date at which a response is required
        
        A review will be undertaken by the project team (Cost Manager / Client)
        
        Any queries raised will be responded to be the contractor
        
        Once queries have been answered, the final CRF will be issued to the Client for signature
        
        Once the signed CRF has been received by the PM, an instruction will be raised and issued to the contractor
    - - Post-contract
        
        Changing the colour of a decorated wall or adding a partition into a space
      - Pre-contract
        
        Changing the specification of the building services to align better with sustainability goals
- - - - 1) Increases productivity - having change control ensures all changes follows a structure process
      - 2) Effective communication – Saves any confusion on how a change might effect cost, time or quality on a project as the process requires any change to document how much it costs, how long it will take and what design changes there are.
      - 3) Better team work and collaboration
      - 4) Risk management – As all the information of changes are detailed out, the analysis of the change can highlight whether agreeing to proceed would have an adverse effects on achieving any of the project objectives on time, cost or quality.
      - Having change control on a project:
    - - The process on Woodwharf was as follows
      - 1) Initiation of a request for change - the contractor shall issue a change request form
      - 2) This will issued to the Client PM for review
      - 3) Each CRF will detail any cost, programme and design changes, as well as the date at which a response is required
      - 4) A review will be undertaken by the project team (Cost Manager / Client)
      - 5) Any queries raised will be responded to be the main contractor
      - 6) Once queries have been answered, the final CRF will be issued to the Client for signature
      - 7) Once the signed CRF has been received by the PM, an instruction will be raised and issued to the contractor
  - - - It is a financial report produced at agreed intervals on a project which provides an overview of the client's current financial commitment. The purpose of it is to inform the client of the likely outturn cost of the project, including forecasting the outturn cost as a variance against the budget and/or tender sum. This will give the client an understanding of potential savings or additional monies required
- - - - a) Value Management (VM) is about getting the right project.
      - b) Value Engineering (VE) is done to get the project right.
      - c) Value Analysis (VA) relates to the improvement of a construction, manufacturing or management process and also to a post project review to establish value achievement.
    - - Value can be thought of as a very simple idea – the ratio between the benefit derived from a course of action and the cost or effort required to achieve it. This idea is universal, but it can be seen very clearly in terms of design and construction decisions both large and small.
        
        Examples of Value
        
        1) Costs - Whole lift costs to be understood. As an example some initial sizeable costs could be justified and explained if it reduces future maintenance costs.
        
        2) Time - time or programme issues could often be a major problem on a scheme. This could cause funding problems and in fact increases overall scheme costs
        
        3) Function - this is the wants and needs of the stakeholders, with some being essential 'must haves' and whilst others being less important. All options must be considered in an effort to ensure true value management
  - - - 1) Live data base from current projects
      - 2) BCIS
      - 3) Previous projects of similar size or specification could be used
  - - - 1) Generator – Lead times to consider as well as the regulations on the use of red diesel changes which meant the type of fuel we had to propose would be more expensive
      - 2) Comms room in the middle of the floor plate - This had to remain live and in operation as the construction works took place. Walls had to be taken out around this.
  - - - A contract sum analysis is generally prepared by a contractor as part of their tender on design and build projects. It breaks down the contractor's price into a form allowing the client to analyse it and to compare it to other tenders, and may then be used as a basis for calculating payments due to the contractor as the works progress.
  - - - The process on Cobalt was as follows:
      - 1) Initiation of a request for change - the contractor shall issue a change request form (CRF)
      - 2) This will issued to the Client PM for review
      - 3) Each CRF will detail any cost, programme and design changes, as well as the date at which a response is required
      - 4) A review will be undertaken by the project team (Cost Manager / Client)
      - 5) Any queries raised will be responded to be the contractor
      - 6) Once queries have been answered, the final CRF will be issued to the Client for signature
      - 7) Once the signed CRF has been received by the PM, an instruction will be raised and issued to the contractor
    - - 2) Running a risk register, identifying the risk, its cause and effect, its risk category and how it could be mitigated. If required risk budget was allocated against risks that could not be actively mitigated.
      - 1) Holding risk workshops
  - - - As the provisional sums are undefined, it doesn’t take into account the time aspect or any prelims involved so this could effects achieving programme dates as well as becoming more expensive once the provisional sum can be firm costed
  - - - In simple terms, CVR is the profit and loss statement for the project, whereby the organisation calculates the amount of work done to date and the cost incurred to date. The two are then compared, with the difference being the amount of profit or loss made at that point in time
  - - - Definition - Provisional sums are generally an allowance or estimate included within the contract price that are:
        
        1) Not sufficiently defined, designed or detailed to allow an accurate determination of its costs at the time the contract is entered; and/or
        
        2) Work that the employer may or may not wish to be carried out
    - - 1) Under the JCT contracts the contract administrator should issue an instruction for its expenditure
      - 2) Where a contract includes a provisional sum, the final amount payable will be adjusted as the provisional sum is omitted and replaced with the actual cost of the works
    - - By the time the project has reached final account stage, the contract administrator will have issued instructions to expend all provisional sums. The instruction will show an add and omit (add actual costs and omit the provisional sum), the instructions are then accounted for in the usual way
    - - Defined: The contractor is deemed to have allowed for programming and preliminaries within the contract
      - Undefined: The contractor does not allow for planning, programming and preliminaries implications. This means the contractor may be entitled to an extension of time and/or additional preliminaries when the actual works are undertaken
- - - - Definition - This is a financial planning tool that shows the predicted flow of cash in and out of a project. This is typically shown month-by-month, for the duration of the project. When the construction phase is underway, the cash flow projection for contractors payments will typically form an 'S curve'.
        
        What can monitoring cashflow on a project show you?
        
        4) The projection can also act as a sense check for monthly contractor valuations
        
        3) Allows the employer to gain an understanding of the potential financial commitment at a specific point in the future
        
        2) The projection will enable the employer to plan and anticipate for periods of cash shortage and take corrective action where necessary
        
        1) Cash flow projections will assist with planning expenditure and ensure that an appropriate level of funding is in place for future payments
        
        Cash flow projection is a financial planning tool that shows the predicted flow of cash in and out of a project. This is typically shown month-by-month, for the duration of the project.
        
        What is the benefit of monitoring project cashflow against forecasted cashflow?
        
        By monitoring forecasted against actual cashflow can highlight whether the project is behind or ahead of programme or indicate whether a contractor has been over/under claiming.
        
        Contractor cash flow projections will typically show construction costs, materials, labour, plant, preliminaries etc)
        
        Employer cash flow projections usually consider the project is a much broader context and might include costs such as but not limited to:
        
        Statutory authority fees
        
        Consultant and legal fees
        
        Land acquisition charges
        
        Marketing and sales charges
        
        Financing
        
        Employer capital salaries
        
        Employer benefits to accurate cash flow projections
        
        1) Cash flow projections will assist with planning expenditure and ensure that an appropriate level of funding is in place for future payments
        
        2) The projection will enable the employer to plan and anticipate for periods of cash shortage and take corrective action where necessary
        
        3) Allows the employer to gain an understanding of the potential financial commitment at a specific point in the future
        
        4) The projection can also act as a sense check for monthly contractor valuations
        
        Contractor payments
        
        If the monthly valuations are behind the cashflow projection - This could be an indication that construction works are behind programme
        
        If the monthly valuations are ahead of the cashflow projection - The project is ahead of programme, or the contractor is overclaiming