218.325
POST CONTRACT FINANCIAL
ADMINISTRATION
Semester 1, 2024
ASSIGNMENT ONE
(A) INSTRUCTIONS:
1. This is an individual assignment.
2. This ASSESSMENT ONE contains TWO questions. Answer ALL questions.
3. Total marks for the assessment two: 100 marks
4. Total course weightage and contribution of the assessment component = 30%
5. Submission date (Stream deadline): Thursday, 18 April 2024, no later than 11:50 pm 6. Online submission on Stream: COMPULSORY. No hard copy submission is required
7. Late assignments will be penalised as per the course guide and the school’s policy.
8. You must include your names and IDs, the course number, the course title, and the names of the course teaching team on the cover page.
9. You are only allowed to submit the following on Stream.
i. Excel – For calculations & charts
ii. Word documents or PDF – Explanations/ reporting.
(B) MODE OF SUBMISSION:
10. You MUST submit your assignment to the Stream drop-box with the file name 218.325-
A1-2024-[student name]- [student ID].
11. If necessary, the appendix may be submitted as a separate file with the file name:
218.325-A1-APPENDIX-2024-[student name]-[student ID].
(C) LEARNING OUTCOMES COVERED:
LO2. Prepare post-contract cost forecasting, cost monitoring and reporting
QUESTION ONE: 70 MARKS
“Cost control is an essential part of any commercial organisation. Unfortunately, construction firms and associated sub-contracting organisations tend to face issues in maintaining effective financial control systems compared to other industries. However, it is essential that project costs are monitored. Construction firms traditionally operate on small profit margins and limited working capital, and as a result, it is vitally important to maintain a
positive cash flow” (Paraphrased from Birchall & Ramus, 2007).
Assume that you are a Quantity Surveyor for a major construction company in New Zealand. Your company has just signed a new contract to construct an office building in Auckland. The post-contract stage has started, and the company assigned you as the project Quantity Surveyor. Your site manager asked you to prepare a cost report based on the expected cash
flow of the project. The following information is given to you.
Retention - 10% from each valuation (release 50% at the practical completion, and the rest of the retention to be released at the final completion)
The retention amount is capped and is subject to a maximum of 5% of the Contract Sum
The estimated profit of the project is 20%
Payment claims amount and the certified payments are the same with no adjustments (GST is not required to be calculated)
Defects liability period is 3 months
Use the information in Table 01 on page 5 of 8
Task 01
Standard Conditions of Contract in New Zealand (NZS 3910: 2023) does not include an Advance Payment Clause. Therefore, using Ms Excel prepare a table to calculate the following
for each month without the Advance Payments. List any assumptions required for your
calculations.
a. Cumulative budget/ Earned Value
b. Monthly payment claims
c. Revenue
d. Expenditure
e. Capital
Task 02
Using the calculations in Task 01,
a. create a chart to draft the Budget curve, revenue curve, and expenditure curve
b. create a separate sawtooth diagram to draft the capital. [10 marks]
Task 03
After you finish the cash flow, the principal decided to pay an advance to the Contractor to start the work. Since there is no clause for advance payment in NZS 3910, the Contract Administrator added an advance payment clause to the Special Conditions of Contract section
as below. Now:
a. make a copy of the calculations and charts you prepared in task 01 and update them incorporating the advance payment.
b. List any assumptions you had to make to these calculations [20 marks]
|
Advance payment
10% of the Contract Sum as an advance is payable to the Contractor before commencing the work. The Advance will be recovered 25% of each monthly payment claim/ certified payment before deducting the retentions. However, advance recovery will not start until the overall progress of the project reaches
10%.
|
Task 04
The client and the consultant Quantity Surveyor have requested a cost-forecasting report for the project. The report includes the charts and diagrams from tasks 2 and 3. Using your answer to the above tasks 1, 2, and 3, provide a report explaining the cost forecast. Your explanation must include the following.
a. Behaviour of the cash flow without payment advances (tasks 1 and 2)
b. Behaviour of the cash flow with payment advances (task 3)
c. Apart from payment advances, briefly explain other methods that are available to address the impact of negative cash flow [15 marks]
QUESTION TWO: 30 MARKS
Assume that your project in Question One has reached the end of the 4th month and 47% of the project is completed. The construction manager asked you to prepare the cost control and
forecast report based on the current situation.
|
Scope of
work
|
Budgeted
Value (BAC)
($)
|
Actual Cost of Work Performed (AC) each month ($)
|
|
Month 01
|
Month 02
|
Month 03
|
Month 04
|
|
Office Building
|
8,000,000.00
|
261,000.00
|
890,000.00
|
1,200,000.00
|
1,420,000.00
|
|
Progress of work
|
9%
|
30%
|
40%
|
47%
|
Task 01
Calculate the following:
a. Planned Values
b. Actual Cost
c. Earned Value
d. Cost and Schedule Variances
e. Cost and Schedule Performance Indices
Task 02
Draft the information into an S-curve chart to show the status of the project. List any
assumptions required for your calculations. [5 marks]
Task 03
What is the forecasted cost and duration at the project completion? Assume that the same
cost and schedule performance indices will continue to affect the remaining work.[5 marks]
Task 04
Based on the cost and schedule performance indices you calculate, what performance rate to
be maintain to finish the project at the Estimate at Completion from task 3? [5 marks]
Task 05
The construction manager has requested a cost update of the project at the end of the 4th month of the project. Using your answers for tasks 1 to 4, provide a cost update explaining the project’s current status and forecast for the rest of the project. [10 marks]