During this post we’ll run through some practice questions and answers focussed on the Quantity Surveying Pathway. This mock interview will cover the core competencies for the QS pathway including Design Economics & Cost Planning, Project Financial Control & Cost Reporting, Quantification & Costing of Construction Works, Construction Technology, Contract Practice, Procurement & Tendering and Commercial Management of Construction. From my experience of helping colleagues pass their APC over the last 9 years, I compiled the following questions & answers based on past interviews and really hope this helps candidates feel better prepared for their final assessment interview.
Design Economics & Cost Planning
Question) Can you please explain the difference between an order of cost estimate and a cost plan?
Answer) A cost estimate is prepared earlier on in the design process, typically between RIBA Work Stages 0 (Strategic Definition) to Stage 2 (Concept Design). This is when the level of design information is more limited and allows a cost estimate to be prepared on a cost per m2 or cost per functional unit basis. A cost plan is produced typically at each RIBA Work Stage from Stage 2 onwards. As the design progresses more information can be included to eventually break down the estimated cost of the development elementally into each of its component’s parts such as sub-structure, superstructure, services & professional fees into an elemental cost plan format.
Question) Can you please explain the difference between a defined and undefined provisional sum?
Answer) A defined provisional sum is one that relates to works that cannot be accurately measured but where there is sufficient information about the works including their nature, method, location, quantity and limitations to allow planning, programming and pricing of preliminaries to take place. The contractor would therefore only be entitled to claim for any increase in the cost of the physical works and is deemed to have included for preliminary costs within their tender. Where there is insufficient information, the works are classed as an undefined provisional sum entitling the contractor to claim costs for additional prelims and an extension to the programme as a result of carrying out the undefined provisional sum.
Question) Please explain your understanding of the term wall to floor ratio?
Answer) This shows the relationship between the wall area and floor area. It is used to show the cost efficiency of the building as the lower the ratio, the cheaper the building is to construct as there is less external envelope required in comparison to the floor area. The wall to floor ratio of a building is calculated by dividing the external wall area by the gross internal floor area. An efficient ratio for a typical office building is between 0.40 to 0.50 with anything below a ratio of 0.35 considered as inefficient.
Question) How would you review a Main Contractor’s application for payment under a cost reimbursable contract?
Answer) Upon submission of the application by the contractor, I would ensure this is provided in the agreed format and level of detail. I would then review all of the costs incurred to date in respect of labour, plant, materials, overheads and profit. This would then be compared against the fee schedules and rates within the contract. Timesheets, staff grades, rates, project codes, payroll burden, invoices, subcontract accounts, material invoices and delivery tickets would all be checked against the contract rates to enable adjustments to be made to the certified sum if required.
Question) What is meant by the term construction to shell and core?
Answer) The term shell and core refers to the basic structure, services and envelope of the building. This normally includes the fit out of landlord and shared common areas of the building for example the reception, toilets, lifts, lobbies & stair cores. Base services are typically terminated at entry points to each of the lettable floor plates however life safety services infrastructure is normally provided within a shell and core fit out.
Question) Please explain your understanding of the term CAT A fit out?
Answer) CAT A fit outs are also known as a ‘developer’s fit out’. This provides a generic fit-out of items to suit most developers for example life safety elements and basic fittings such as suspended ceiling tiles, raised floors, carpets, lighting and power distribution to floor plates. The intention is to provide a functional open space ready for customisation by the end user. Bespoke end user items required by the tenant such as specialist M&E installations, internal partitions to the floor plate areas and kitchen facilities are usually excluded under a CAT A fit out.
Question) What is a CAT B fit out?
Answer) A CAT B fit out overlays the CAT A provision with bespoke elements that are specific to the needs of the end user or tenant to enable them to occupy and use the space for the purpose intended. This would typically include partitions, power distribution to floor boxes, data cabling, artwork and branding, upgrading CAT A finishes and toilet finishes.
Question) What is an order of cost estimate?
Answer) Under the New Rules of Measurement this is described as the determination of the possible cost of a building early in the design stage in relation to the employer’s fundamental requirements. This takes place prior to preparation of a full set of working drawings or bills of quantities and forms the initial build-up to the cost planning process.
Question) What is the purpose of an order of cost estimate?
Answer) This is to establish if the proposed building project is affordable and if affordable, to establish a realistic cost limit. The cost limit is the maximum expenditure that the client is prepared to spend on the proposed building project.
Project Financial Control & Cost Reporting
Question) How would you create a cashflow forecast?
Answer) I would need to have access to the construction programme and contract sum analysis in order to populate the cashflow. The values associated with each element of construction could be forecast at times to reflect their installation within the programme. I would split the works into the different packages as shown on the contract programme and include individual s-curves for each package. Obtaining drawdown schedules from specialist subcontractors and professional consultants can also assist when populating the cashflow. An alternative approach would be to utilise a previous cashflow from a similar scheme or to use cashflow forecasting software although this may not be as accurate.
Question) In a scenario where the construction budget was £2.5m and proposed construction period was 25 weeks, would a forecast cashflow expenditure of £100,000 per week be realistic?
Answer) In reality this would not be very realistic as the cashflow expenditure per week is unlikely to have a flat or regular profile. In reality the expenditure is much more likely to have an S-curve (standard) profile where at the start of the scheme, the expenditure per week will be fairly low as the site setup and enabling works are undertaken. As the scheme progresses, items that are of higher value such as the steel frame and mechanical & electrical installations will be undertaken. The cost expenditure per week at this stage will be much higher than at the start of the scheme. As the scheme draws to a close, minor finishing items such as decoration and cleaning packages will be undertaken again resulting in a lower expenditure cost per week.
Question) What items would you typically include within a financial report?
Answer) A financial report would usually make reference to the following items although this can vary depending on the client’s reporting requirements:-
- The contract sum total.
- The value of instructed variations.
- The value of potential future variations.
- Ongoing claims.
- Provisional sum adjustments.
- The anticipated final account total.
- The total of certified payments made to date.
Question) What are the common items included within a loss and expense claim?
Answer) Common items within Loss and Expense claims include:-
- Extension of preliminary costs for the period of prolongation.
- Disruption and standing time that results in plant or labour being under utilised.
- Increases in labour or material costs during the period of delay.
- Head office overheads.
- Loss of profit.
- Finance charges.
- Acceleration costs.
- Claim preparation costs.
Question) Please explain your understanding of the term dayworks?
Answer) Dayworks are a method of valuation that can be utilised to value building works that are difficult to value under the rates of the contract. A daywork record sheet listing the actual cost of all the materials, labour and plant expended is used to enable the contractor to seek financial recovery from the employer.
Question) What information is necessary in order to assess dayworks?
Answer) Daywork records are submitted by the contractor to the employer so they can seek financial recovery for the works expended. These will make reference to the names of the workmen, plant and materials used in addition to a description of the work undertaken. Sometimes marked up drawings and photos are also submitted to substantiate the daywork claim. The daywork records are usually signed and authorised by a representative of the employer.
Question) What are variations?
Answer) Variations are alterations or modifications to the design, quality or quantity of the contract works or to the site access or working conditions.
Question) Why might variations arise?
Answer) Variations may arise due to a change of the specification, discrepancies between contract documents, discrepancies with statutory requirements, errors or omissions and deficiencies in the employer’s requirements.
Quantification & Costing of Construction Works
Question) What is the purpose of a Bill of Quantities?
Answer) The purpose of the Bill of Quantities is to provide the estimator with an accurate picture of the scope of works and to provide a common and consistent basis for pricing the project. Following receipt of Tender submissions, the Bill of Quantities also forms the basis of the Tender Analysis and allows an accurate like for like comparison to be undertaken. Throughout the post contract stages, it also provides the basis for the valuation rules of the contract for valuing variation items by referring to the rates contained within the bill. It also enables the contract works to be assessed and valued for the purposes of interim payments.
Question) How would you prepare a Bill of Quantities?
Answer) I would meet with the design team to establish when the necessary information will be available, it is important to ensure the information provided is full and final to avoid abortive works. Following this I would look to compile all information necessary from the Design Team including drawings, specifications, schedules and document registers. Following receipt of the information, I would check to see if the information is sufficient to allow the Bill of Quantities to be complied. This largely depends on the form of contract for example, under remeasurement forms the information does not have to be complete but must be substantially complete. I would discuss and agree with the client and design team the method of measurement to be adopted. Prior to commencing measurement and taking off quantities, I would consider the size of the project and break the works down into sections and areas for example, Substructure, Superstructure & External Works. I would then commence the take-off & work from the substructure upwards. When measuring is complete I would look to address the general items section & any preambles. Following production of the Bill of Quantities, I would carry out regular meetings and review any updated drawings to ensure that no works items had been missed or overlooked between packages.
Question) What items would you include within the take-off when measuring a basement?
Answer) It would depend on how the basement would be constructed however when measuring a basement with piled walls and assuming the site was clear, I would measure excavation & disposal, continuous piles to walls including the piling rig, hard standing piling mat, testing, cutting & prep heads, excavation & disposal of arisings, preparation of the excavated surface, waterproofing, blinding, concrete to the basement slab & walls, reinforcement. formwork to walls, finishes to concrete and internal finishes.
Question) What is meant by the term Gross Internal Area?
Answer) Gross Internal Area is the area of the building measured to the internal face of the perimeter walls at each floor level. The Gross Internal Area excludes external open sided balconies, fire escapes, canopies, external walls and fuel stores.
Question) What is meant by the term Net Internal Area?
Answer) Net Internal Area is the area of usable floor space measured to the internal face of the perimeter wall at each floor level. The Net Internal Area excludes internal structural walls and columns, spaces with headroom less than 1.5m, permanent lift lobbies, toilets, cleaners’ cupboards and plant rooms.
Question) Where are the terms ‘Gross Internal Area’ and ‘Net Internal Area’ defined?
Answer) They are defined within the Code of Measuring Practice published by the RICS.
Question) What is the purpose of the Code of Measuring Practice?
Question) How do you measure brickwork walls under the New Rules of Measurement and what other items would you measure in association with these?
Answer) The measurement rules for Masonry are contained within section 14 of the New Rules of Measurement. Masonry walls are to be measured in m2 with them being itemised according to wall thickness, type of construction and method of formation. Other items to measure in association with masonry include chimney stacks, arches, brick reinforcement, forming cavities and closing cavities.
Answer) The Code of Measuring Practice provides precise definitions to permit the accurate and consistent measurement of buildings.
Question) What would you expect the percentage of Net Internal Area to Gross Internal Area to be typically?
Answer) The percentage would depend on the type of project being undertaken for example whether this was a school, hospital or office. In the case of an office building, I would expect the Net Internal Area to Gross Internal Area percentage to be in the region of 70-85%. Where 70% is considered as relatively inefficient, a percentage of 85% is extremely efficient.
Construction Technology & Environmental Services
Question) What are the technical advantages of steel frames?
Answer) Steel frames are often quicker to assemble in comparison to alternative methods. They are 100% recyclable and inorganic meaning they will not warp, split, crack or creep. Steel frames also offer the highest strength to weight ratio of any building material availble and are not vulnerable to termites or any type of fungi or organism. They are dimensionally stable and do not expand or contract with moisture or temperature changes. Due to strict manufacturing controls, consistent material quality can be obtained due to production taking place in line with strict standards. Steel is non-combustible so it will not contribute to the spread of a fire and is also lighter in comparison to concrete frames and will often benefit from a cheaper foundation solution.
Question) What are the disadvantages of steel frames?
Answer) Steel frames require fire protection to be retrospectively installed in the form of boarding or protective coatings such as intumescent paint. Fixing components may require replacement over time and the price of steel often fluctuates which can result in a lack of cost certainty. Installation of steel frames requires experienced and skilled builders which carries a cost premium in comparison to other building methods. Skilled labour resources can also be difficult to acquire depending on market conditions. Due to the speed of installation, steel frames can carry a high cashflow burden on the employer or developer early on in the construction cycle in comparison to other forms of construction.
Question) What are the technical advantages of concrete frames?
Answer) Fire protection is often provided inherently as part of the structure. Due to offering a slower form of construction in comparison to alternative methods, this will likely result in reduced cash flow expenditure early on in the development. Maintenance requirements associated with concrete frames are relatively low in comparison to alternative methods. Concrete frames often provide good sound and heat insulation properties in comparison to steel frame construction.
Question) What are the technical disadvantages of concrete frames?
Answer) In comparison to steel frames, concrete is often more time consuming to install. There may also be complications during the install resulting from cold or inclement weather conditions. The need for steel reinforcement can lead to issues around price fluctuations and cost uncertainty associated with steel frames. Concrete frames are often heavier and require larger foundation solutions which are usually more expensive.
Question) What are the different types of piled foundations?
Answer) Sheet piles take the form of a deep trench which is excavated and concrete then poured in situ, the piles can be used to form basement walls or act as retaining walls. Secant piles have interlocking male and female piles with different diameters and hardness. These are bored to provide a combination of foundations and basement walls. They support in providing a waterproof structure and are often seen when a top down construction method is used. Bored Piles are formed with an auger to excavate the soil and concrete is then poured in when the excavation is complete. Pre-cast piles are hammered into the ground however this is not often favoured due to the high noise levels associated with installation and the lack of flexibility in terms of the foundation depth required.
Question) What are the different ways that piled foundations transfer their load to the surrounding ground?
Answer) End bearing piles transfer the building load through low bearing capacity soil to a strong stratum such as rock or very dense sand. Friction piles bear on frictional resistance between their outer surface and the soil they are in contact with. Settlement reducing piles are usually incorporated beneath the central part of a raft foundation in order to reduce differential settlement to an acceptable level. Tension piles resist uplifting forces that might otherwise cause the structure to be extracted from the ground due to uplifting forces such as hydrostatic pressure, seismic activity or overturning movement.
Question) What is the difference between bored vs. pre-cast piles?
Answer) Bored piles are formed with an auger that uses a boring technique to remove the spoil to form the hole that concrete and reinforcement is then placed into. They are used primarily in cohesive subsoils for the formation of friction piles and when forming pile foundations close to existing buildings where the allowable amount of noise and vibration is limited. Pre-cast piles are generally used where soft soil deposits overlie firmer strata. These piles are usually driven using a drop or single action hammer. Issues can arise due to the noise levels associated with the installation method of pre-cast piles.
Question) What are the 3 main methods of waterproofing a basement?
Answer) Dense monolithic basements are designed and built to form a watertight space using high quality reinforced concrete. This requires good workmanship and strict quality control with their success depending on the water to cement ratio and the degree of compaction. Joints also need to be carefully designed and sealed. Tanking basements use materials such as asphalt, polythene sheeting, bitumen and epoxy resins. These can be applied internally or externally to provide a continuous membrane to the base slabs and walls. External application is better as it protects the structure in addition to the waterproofing. Drained Cavity solutions can be used for new or refurbishment work. This allows a small amount of water infiltration to occur. The water is collected and then drains away to a sump or is directly discharged using a pump.
Contract Practice
Question) What is nomination?
Answer) Nomination is the selection of a particular subcontractor to carry out the construction works, manufacture or supply of materials. The nomination will usually be made by the architect or client as this provides them with a greater degree of control for material choices, suppliers and quality. It is often used when there are long lead-in times with the employer placing orders prior to the Main Contract award which can reduce potential delays to the construction phase. The Main Contractor is relieved of liability of design and compliance with the performance specification in addition to subcontractor delays in respect of the works that have been nominated.
Question) Can the contractor object to a nominated subcontractor?
Answer) Any objections must be made during the tender period. There are specific exclusions and grounds for an objection for example if the Main Contractor has identified that the Subcontractor is experiencing financial difficulties or has become financially insolvent.
Question) If there are issues with the design following novation of the architect, who would be responsible?
Answer) At the point of novation, the client would typically agree that the level of design being provided was satisfactory and this would be signed off by all parties. The contractor would then become responsible for the Architect and their design should any problems arise during the construction phase.
Question) Can you explain the difference between statutory provisions and contract provisions?
Answer) Statutory provisions are set out by law and must be complied with for example the Housing Grants, Construction and Regeneration Act sets out the statutory payment provisions that apply to construction operations. Contract provisions relate to the contract in question and therefore only apply to a specific project.
Question) What are named subcontractors?
Answer) For Named Subcontractors, the Client would provide the Main Contractor with a choice of Sub Contractors they must select to carry out a portion of the works. Once appointed they would become a domestic subcontractor in terms of the conditions of contract. Additional names may be added if approved by all parties which allows the client a level of control over the quality of the works packages.
Question) What would you do in a scenario where following issue of a payment certificate, the client advised that they do not have sufficient funding in place to make the payment?
Answer) Once the certificate has been issued to the contractor, the client is contractually obliged to honour payment of the certificate and cannot withhold money without a valid reason. If this were the case, I would contact the client and contractor as soon as possible to facilitate transfer of the payment. It may be the case that the client has insufficient funds available in time for the final date for payment and it may be possible to defer this payment by one or two days. Failing this or if the contractor is unwilling to delay the payment, the client would need to make financial arrangements in order to honour the payment required under the payment notice.
Question) What is the defects liability period?
Answer) The defects liability period is the duration at the end of the contract, usually 52 weeks after the Substantial Completion Certificate has been issued whereby the contractor undertakes to rectify any defects that arise within the structure at the contractors expense. This is carried out providing that the defects resulted from the materials or workmanship not being in accordance with the contract conditions. In the event that the contractor failed to rectify any defects, the employer may employ another contractor to carry out the works and recover the cost of doing so from the Main Contractor. The retention money retained may be used to cover the costs of making good the defects.
Question) What is your understanding of latent defects and what contractual issues are associated with them?
Answer) Latent defects are defects which are not readily identifiable upon inspection and only come to fruition some time after completion of the building and may take many years to become fully identifiable. A claim under the contract can only be brought about within the limitation period of the contract which is 6 or 12 years depending on whether the contract was executed as a deed or underhand.
Question) If the works or materials are not in accordance with the contract, what options does the architect have available to them?
Answer) The architect may instruct the contractor to remove all defective work, materials and goods at their own expense and time. They can also notify in writing that the works can remain however an appropriate deduction is made from the contract sum. Another option is to issue an instruction for variations that are necessary as a result of the work. If they are necessary there should be no additional costs or extension of time given. An instruction can also be issued to the contractor to open up and test further work in order to determine the extent of any non-compliance.
Question) When issuing instructions for further opening up and testing of the works to determine the extent of non-compliance, what factors should the architect consider?
Answer) They should consider the significance of the non-compliance and the consequences for the building owners, end users, adjoining properties and members of the public. The reasons for the non-compliance should also be considered in addition to the level of supervision and control employed by the contractor, recognised testing methods, time and consequential costs of further opening up of the works.
Procurement & Tendering
Question) Can you please explain your understanding of traditional procurement?
Answer) Under a traditional procurement route, the design is completed by the client’s design team before a main contractor is employed to build what the designers have specified. The contractor takes responsibility and financial risk for the construction of the works to the design produced by the client’s design team. The client maintains responsibility and risk for the design and design team performance.
Question) What are the advantages of traditional procurement?
Answer) The client and their design team retains control over the design which can lead to higher quality over the materials and products that are specified. With a design largely complete at the time of tender and agreement of the contract sum, traditional procurement can also offer increased levels of cost certainty in comparison to other procurement methods. Design changes are also reasonably easy to arrange and value as there are typically rates listed within the contract sum that will form the method of valuation.
Question) What are the disadvantages of traditional procurement?
Answer) The overall project duration may be longer than other methods of procurement due to there being no overlap between design and construction phases. There is no input into the design and planning stages by the contractor and therefore no opportunity to utilise the contractors buildability expertise. There is a dual point of responsibility with the design team controlling the design and the main contractor retaining responsibility for the construction meaning there are two separate relationships for the client to manage.
Question) What is design and build procurement?
Answer) Design and build procurement is where the contractor holds responsibility for the design, planning, organisation, control and construction of the works to the employer’s requirements listed within the contract documentation. The employer provides the tenderers with the ‘Employer’s Requirements’ and the contractors responds with the ‘Contractor’s Proposals’, which include their price for carrying out the works.
Question) What are the advantages of design and build procurement?
Answer) There is a single point of responsibility for the design and construction of the project meaning it may be easier for the client to manage one relationship. An earlier commencement of the construction works may be possible as there can be overlap between the design and construction phases. Transferring risk of the design to the contractor can work in the client’s favour as any design issues incurred are the liability of the main contractor. By agreement of a fixed priced lump sum, design and build procurement can offer high levels of cost certainty. The client can also benefit from the contractor’s buildability expertise during the planning and design stages.
Question) What are the disadvantages of design and build procurement?
Answer) The client has to commit to a concept design early on in the project and any errors or omissions from the employers requirements may prove costly. There is also less control over the design and type of building materials to be used as design responsibility is transferred across to the main contractor. Variations from the employer’s requirements are usually more difficult to arrange and value than other methods of procurement as there is no bill of quantities with rates that can be used to value variations. It can be more difficult to compare tender submissions and determine whether value for money is being achieved as there is no singular bill of quantities that can be used during a tender analysis, instead the tenderers will submit their contractor’s proposals against the employers requirements.
Question) Please explain the management contracting method of procurement?
Answer) A management contractor is employed to contribute their expertise to the design and to manage construction with a management fee being paid to them for doing so. The management contractor has direct contractual links with all of the works package contractors. They have the responsibility for the construction works without actually carrying them out. Not all of the design needs to be completed prior to the first works package contractors commencement on site meaning there can be some overlap between the design and construction phases. The client reimburses the cost of the works packages to the management contractor plus their management fee.
Question) What are the advantages of management contracting procurement?
Answer) The overall project duration can be reduced due to the overlapping design and construction stages as the design does not need to be fully complete prior to commencement of the early works contract packages. The client can benefit from early contractor expertise during the design and planning stages. Changes to the design can be accommodated within the works packages that have not yet been appointed providing they do not carry a significant impact on the works packages that have already commenced. The works packages can be tendered competitively at current market prices on a firm price basis offering good levels of pricing competition.
Question) What are the disadvantages of management contracting procurement?
Answer) The price for the works is not finalised until the last works package contractor has been appointed resulting in reduced cost certainty for the client. Changes to the design later on in the construction phase may affect the works packages that have already been let making it more difficult to accommodate changes. There is little incentive for the management contractor to reduce costs as they usually receive a flat management fee plus the cost of the works. In practice the management contractor has little legal responsibility for the defaults of the work package contractors.
Question) What is construction management procurement?
Answer) The employer places a direct contract with each of the trade contractors and utilises the expertise of a construction manager who acts as a consultant to coordinate the contract. The trade contactors carry out the work and the construction managers supervises the construction process and coordinates the design team. The construction manager has no contractual links with the trade contractors or members of the design team. Their role includes preparation of the programme, determining requirements for site facilities, breaking down the project into suitable works packages, obtaining and evaluating tenders, co-ordinating and supervising the works.
Question) What are the advantages of construction management procurement?
Answer) The overall project duration is reduced by overlapping design and construction phases. The construction manager can contribute to the design and project planning processes. Roles, risks and relationships for all parties are clearly defined. Changes in the design can be more easily accommodated without paying a premium as is the case under alternative forms of procurement. Prices may be lower due to direct contracts with trade contractors. The Client also has a means of redress for any defaults as they have direct contractual links to each of the trade contractors.
Question) What are the disadvantages of construction management procurement?
Answer) Cost certainty is reduced as the final price of the works is unknown until the last trade package is appointed. Changes to ongoing works packages may adversely affect works packages that are already appointed. The client must be proactive and hands on as they have multiple contractual relationships with each of the individual works package contractors in addition to the construction manager that is managing the works on their behalf.
Commercial Management of Construction
Question) How would you prepare a Cost Value Reconciliation?
Answer) I would determine the cumulative costs and value of the project to a set given point in time. The cut-off date may coincide with an agreed accounting period or month end period which I would establish with the project management team. I would carry out cost checks to ensure that no high value fluctuations in costs or value are expected during the reporting period. I would also ensure that all works in progress is accounted for and the reported values are inline with subcontractor’s measures and liabilities. Risk and contingency items would be included for items not yet agreed. When all costs and value items are finalised I would then determine the current profitability of the project and compare this against the original budgeted values.
Question) How would you ensure that your Cost Value Reconciliation is accurate and up to date?
Answer) I ensure that any forecast revenue on variation items only forms part of my calculations providing that the variation item in question is agreed, this is done to ensure the current profit margin in accurate and not over stated. A reduced profit margin is assumed if variations are paid on account or only partly agreed with the client. Contingency items are retained within the Cost Value Reconciliation for any outstanding risks to the project or pending cost items. I also arrange regular meetings to conclude the agreement of variation items for each of the sub-contract packages so a backlog of pending items does not form.
Question) What is a Cash Flow Analysis?
Answer) A cash flow analysis highlights the movement of income and expenditure into and out of a business over time. If the level of expenditure going out of the company is higher than the income, the cash flow is classed as cash negative and may highlight the need to make additional funding arrangements. The cash flow analysis will typically be based on a number of factors such as under or over valuation of works complete and the impact this may have on cash flow. The contractual payment process is also considered so that the incoming payments can be accurately profiled. Credit arrangements with subcontractors and suppliers are also factored in to the calculations. It is important for contracting organisations to maintain positive cashflow where possible in order to avoid the need for expensive borrowing arrangements.
Question) Please explain your understanding of the term ‘Accruals’?
Answer) Accruals are made within the financial accounting systems that are operated to take into account anticipated invoices that are not yet paid. The accrual can be calculated as the difference in the total liability that is due to a sub-contractor or supplier against the amount already paid to date. The accruals are retained as anticipated cash outflows not yet incurred and in theory the older the accruals are, the less likely they are to paid and may be released at a given point in time.
Question) What processes would you put in place when making a contra charge to a subcontractor?
Answer) I would attach supporting photographs, invoices and site records to the contra charge. Any replacement materials or attendances put in place to assist the subcontractor would also be recorded. I would issue an early warning to the subcontractor’s commercial representative to make them aware of the incoming contra charges and provide then with an opportunity to rectify the damages if possible. I would try to ensure the contra charge is agreed with the sub-contractor prior to making adjustments to any payment certificates or running final accounts. When issuing subsequent payment certificates, pay less notices or final account adjustments, I would clearly set out the contra charges as an individual line item for transparency with supporting substantiation attached.
Question) What does a Risk and Opportunity Register look like?
Answer) The register will typically be compiled in a tabulated form with columns provided for the name and description of the risk item, an explanation of how the risk will impact the project, the likelihood of the risk occurring, a risk grade based on the probability multiplied by the impact, a risk classification of either high, medium or low, a summary of mitigation actions to be taken, the risk owner, the potential cost of the risk and a deadline date of when the risk is to be closed.
Quantity Surveying Questions & Answers Free PDF
To receive a PDF copy of the above questions and answers via e-mail please click here
RICS APC Q&A STUDY GUIDES
