Essential Financial Project Management for professional practitioners

Synopsis:

The book provides the engineer a complete overview of all essential financial aspects which is covered in the management of a project in consulting over the six stages of the project life cycle.

The book also provides practical examples and calculations for cost estimates, order of magnitude, elemental estimates, progress claims, payment certificates, cash flows, fee calculations, variation orders, life cycle costing, professional fee claims, disbursements, tender and adjudication report, cession forms, final accounts, etc.

The full list of topics covered are reflected in the table of contents. A snippet of a section of the book is also included.

 

Contents

List of Tables. iv

List of figures. v

1. Introduction. 1
2. Stages of the project life cycle. 1

2.1        Stage 1: Inception. 1

2.2        Stage 2: Concept and viability. 2

2.3        Stage 3: Design development 2

2.4        Stage 4: Documentation and procurement 2

2.5        Stage 5: Contract administration and monitoring. 3

2.6        Stage 6: Close out 3

3. Stage 1: Inception. 4

3.1        Order of magnitude. 4

3.2        Professional fee proposal 5

3.2.1        Lump sum based. 5

3.2.2        Time based. 6

3.2.3        Fee based. 7

3.2.4        Disbursements. 11

4. Stage 2: Concept and viability. 12

4.1        Project cost estimate. 12

4.2        Life cycle cost analysis. 17

4.2.1        Equipment lifespan. 17

4.2.2        Escalation. 17

4.2.3        Cost category 1: Initial purchase and ownership cost 17

4.2.4        Cost category 2: General and ongoing operational cost 17

4.2.5        Cost category 3: Regular service and maintenance. 17

4.2.6        Cost category 4: Fuel and energy costs. 18

4.2.7        Cost category 5: Disposal cost 18

4.2.8        Cost category 6: Income of disposal 18

4.2.9        Summary. 18

4.3        Professional fees. 21

4.4        Cash flows. 21

5. Stage 3: Design development 21

5.1        Project detailed cost estimate. 21

5.2        Professional fees. 23

5.3        Cash flows. 23

6. Stage 4: Documentation and procurement 23

6.1        General 24

6.1.1        CIDB. 24

6.1.2        CIDB grading. 24

6.2        Tender and adjudication report template format 26

6.3        Tender and adjudication report sample. 28

6.4        Contract documentation. 34

7. Stage 5: Contract administration. 34

7.1        Cash flows. 34

7.2        Progress claims and payment certificates. 40

7.3        Variation orders. 51

7.4        Cession form.. 54

8. Stage 6: Close out 56

8.1        Bill of quantities. 56

8.2        Professional fees. 56

8.3        Final financial report 56

9. Conclusion. 59

 

List of Tables

Table 1: Order of magnitude: Electrical/Electronic option 1. 4

Table 2: Order of magnitude: Electrical/Electronic option 2. 5

Table 3: Order of magnitude: Mechanical 5

Table 4: Lump sum fee estimate. 6

Table 5: Time based fee estimate. 7

Table 6: Hourly rates based on annual salary package. 7

Table 7: Percentage based professional fee. 9

Table 8: Percentage fee breakdown per stage. 10

Table 9: Disbursement calculation. 11

Table 10: Elemental cost estimate: Electrical 12

Table 11: Elemental costing in quantity surveyor format 13

Table 12: Elemental costing of plumbing. 14

Table 13: Estimated project cost per building/block. 15

Table 14: Summary: Total project cost 16

Table 15: Life cycle cost analysis: Data parameters. 18

Table 16: Cost Category analysis. 19

Table 17: Cost analysis: Income breakdown. 20

Table 18: Life cycle cost summary. 20

Table 19: Priced bill of quantities. 22

Table 20: Designation and tender value range. 24

Table 21: Construction class of works. 25

Table 22: Specialist construction classes. 25

Table 23: Tender evaluation method criteria. 27

Table 24: Contractor Cash flow.. 36

Table 25: Consultant’s cash flow.. 38

Table 26: Combined contractor and consultant cash flow.. 39

Table 27: Contract bill of quantities. 41

Table 28: Progress Claim 1. 41

Table 29: Payment certificate 1. 43

Table 30: Progress claim 2. 46

Table 31: Payment certificate 2. 47

Table 32: Progress claim 3. 48

Table 33: Payment certificate 3. 50

Table 34: Variation order authorised submission. 51

Table 35: Financial request for variation order. 52

Table 36: Cession form.. 54

Table 37: Final bill of quantities. 57

Table 38: Financial report 58

 

List of figures

 

Figure 1: Pie chart of life cycle cost summary. 21

3. Stage 1: Inception

A presentation of examples and template documents for an order of magnitude budget and professional fee proposal will now be discussed.

3.1 Order of magnitude

An order of magnitude costing technique is generally a rough high-end budget which should generally be within 20% degree of accuracy for the scope of works. The technique generally utilises a single rate estimate or Rate/m². This method is usually based on previous experience of similar projects, contractors or rates extracted from research done in the property and construction industry which is generally available to the quantity surveyors. It must be noted that these rates and values are specifically for initial investigations and are not for firm project budget approval purposes.

The rates are generally updated on an annual basis by the industry and serve as a guideline. It should be noted that the rates vary per building type and categories and is also dependent on-site conditions, building design, currency fluctuations, user requirements, availability of equipment, contractor expertise, etc.

The following Table 1: Order of magnitude: Electrical/Electronic option 1 indicates a budget for a general electrical and electronic installation for an office park having three (3) floors each measuring approximately 720 m² with a total building area of 2160m²

Table 1: Order of magnitude: Electrical/Electronic option 1

ITEM	DESCRIPTION	AREA	Rate/m2	AMOUNT
	Office Park
1	General Electrical Installation
1.1	Municipal Electrical Connection Fee	2160	R150-00	R 324 000-00
1.2	Standby generating set	2160	R70-00	R   151 200-00
	Standard office park layout
1.3	Office electrical layout: distribution board, lighting, power skirting, general power points, etc	2160	R550-00	R1 188 000-00
2	Electronic Installation
2.1	Telephone, data, fire detection and access control system	2160	R500-00	R1 080 000-00
3	Total excl. VAT			R2 743 200-00