Project Finance Control and Reporting Lecture Notes

Introduction

• Speaker: Sandesh Pangearkar
• Organization: Middle East Quantity Surveyors Association (MEQSA)
• Session Purpose: Discuss project finance control and reporting as a core competency for MRICS (Member of the Royal Institution of Chartered Surveyors).

Speaker Profile

• Educational Background: MBA from University College of State Management (UK), Mechanical Engineering (India)
• Professional Affiliations: Fellow of RICS, Chartered Management Institute, Chartered Association of Building Engineers (UK), Member of Chartered Institute of Arbitrators, Chartered Institute of Building (UK)
• Current Role: Director at David Adamson, leading multi-billion dollar projects, involved in arbitration in London.

Session Structure

1. RICS Description of Competency
2. RICS Levels 1, 2, and 3 Requirements
3. RICS APC Reading List
4. Expected Questions on the Competency
5. Q&A Discussion

RICS Description of Competency

• Focuses on controlling and reporting processes for project finance post-contract.
• Emphasizes managing budget, effective cost control, and reporting during the construction phase.
• Candidates should understand principles of cost control and reporting.

RICS Levels 1, 2, and 3 Requirements

• Level 1: Knowledge and understanding of cost control, legal constraints, effects of quality/time on cost.
• Level 2: Application of knowledge in financial report preparation, effective forecasting.
• Level 3: Advising clients on strategies/procedures for expenditure control.

Key Topics Covered

1. Post-Contract Cost Control

   • Definition: Managing financial matters post-award of construction contract.
   • Activities: Interim valuations, change management, cost reporting, cash flow forecasts, final accounts.
   • Importance of variance analysis between budget and actual costs; actions to control costs include:
     • Implementing change control processes
     • Proactive risk management
     • Regular and forward-looking cost reporting

2. Change Control Procedures

   • Importance of assessing and managing change.
   • Change control helps clients make informed decisions based on cost, program, and scope effects.
   • Key considerations:
     • Client's objectives
     • Key decision makers
     • Funding for changes
     • Procurement processes

3. Cost Reporting

   • Importance of proactive reporting; should include assumptions, basis, and exclusions.
   • Monthly reports should provide best estimates of final account costs and updated cash flows.

4. Claims and Loss and Expense

   • Claims arise from delays, disruptions, and changes.
   • Loss and Expense Claims: Focus on direct costs due to delays/disruptions, excludes consequential losses.

5. Risk Management

   • Identification, analysis, ranking, and response to risks.
   • Risk registers and contingency risk allowances.

6. Value Management and Value Engineering

   • Value management: Overall structured approach to optimize project value.
   • Value engineering: Focus on specific functions to reduce costs while maintaining quality.
   • Benchmarking: Comparing performance against best practices for continuous improvement.

Expected Questions in RICS Interviews

• Questions will relate to the candidate’s summary of experience, including:
  • Measures taken to control costs during construction.
  • Importance of cost reporting and change control.
  • Experience with valuation, retention, claims, and risk management.

Conclusion

• Importance of being prepared for a variety of questions related to project finance control and reporting.
• Next sessions: Contract Practice and Contract Administration.

Notes

• Encourage participants to engage in discussions and seek clarification on any aspects covered.
• Remind participants to review the recording and materials shared after the session.