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Project CostingAssignment #5 – Contractor’s CashflowA developer has accepted the quotation from your company to carry out the works to lockup stage for construction of a precast concrete Warehouse and Office illustrated on theattached drawing Nos. S15001, A15001-c and C15001-4. The works include demolition of anexisting house and removal of a large steel framed shed.The contract has been signed and has the following requirements:Contract Price:One Million Three Hundred and Sixteen Thousand, Eight hundred and Fifty Eight Dollars$1,316,858Time to complete:26 weeksYou have immediate and unrestricted access to site.You are the project engineer for this job and report to the company General ManagerConstruction, who has control of the allowances, contingency and profit margin (i.e. 26%mark-up included in the Contract Price).The Chief Financial Officer of the company has issued you with the following budget forwhich you are to control expenditure for the project:Project Budget:$835,950(for works excluding Prime Cost Items)You are also to control expenditure and invoicing of the Prime Cost subcontracts listed inTable 1.Table 1: Total Subcontractor Prime Cost payments due:$ 167,110DescriptionAmountWeek5620214.1Excavate & install 300 RCP, 200PVC and 100 PVC stormwaterdrains and PC conc pit, includingtrenching, bedding andbackfilling to specification (EtonDrainage).$ 35,460$ 17,730$ 17,7304.3Supply and install includingexcavation and backfilling 100dia fire service & water supply(Pronto Plumbing).$ 18,750$ 9,375$ 9,3758.1Supply and install roof sheetingflashing and downpipes toWarehouse and Office (Rufusthe Roofer).$ 78,650$ 39,325$ 39,3259.2Electrical 415V supply todistribution box in warehouse.(Towner Electrics).$ 25,750$ 25,7509.5Telecom and data cabling fromstreet to distribution board(DataStream).$ 8,500$ 8,500tmp65ankhr1Assignment-5-Contractors-Cashflow2016docx-4475.docxPage1of 2
Project CostingAssignment #5 – Contractor’s CashflowDescriptionAmountWeek26Attendance & incidentals on PCitems (8.5%)$14,204$14,204Prime Cost (PC) expenditures are nominated by the owner and are for the values and at theintervals indicated in Table 1 above. PC sums are paid by your company to the relevantsubcontractor in the week shown in Table 1. Those amounts are then claimed from theOwner in the month paid (Table 1) and your company receives payment one month later.The Principal has agreed that it will pay monthly claims, within 30 days of receiving anapproved certified payment certificate and invoice. It takes an average of 2 weeks from theend of a month for the company’s supervisor to measure the work and submit a progressclaim to the client and it will take the client’s manager a further 2 weeks to certify thepayment.The defects liability period on this contract is 26 weeks from contract practical completion.The contract form is AS4000, cash retention is 10% (the company is not able to obtain bankguarantees to allow payment in full) and will be retained to the end of the defects liabilityperiod of 26 weeks. See the attached extract from AS4000.Your company prides itself on paying trade subcontractors and material suppliers within 14days of an invoice and invoices are generally received within 7 days of material supply orwork done. As a result the company has loyal, well established and reliable suppliers andsubcontractors.The accounting department advises that employees are paid fortnightly and the averageaccrual period for expenses is 3 weeks.Most subcontractors are small businesses and they submit weekly claims for payment.The bank charges your company an interest rate on the outstanding cash flow of 10.4% (onoverdrafts) and zero % on positive balances.The forecast expenditure for the project (without the PC items) follows an ‘S’ Curve (Sigmoidfunction) with the characteristics listed in Table 2.The table of weekly Paid and Earned cost was supplied by the project scheduler and is interms of the value of work done (Paid cost to suppliers and subcontractors) and the value ofwork earned priced at the contract payment rate, as set out in Table 2.You have been asked by theChief Financial Officerto produce a professional excel model forthis analysis and you expect to use this analysis for future projects as well as supply theexcel model to colleagues.tmp65ankhr1Assignment-5-Contractors-Cashflow2016docx-4475.docxPage2of 2
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