Cost Monitoring and Management

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Note

• 5/4/2022: Split from Post Contract.
• 3/4/2020: Created.

Advise on estimated costs of potential changes to the Contract Sum

1. Design changes may be proposed during the course of construction.
2. The Employer may like to know the estimated costs before approving to make the design changes.
3. QS estimates the costs based on the Architect’s or Engineer’s design.
4. The design may not be complete for estimating at the earliest time for quick decision making.
5. Whether the design is complete or not, approximate estimating using approximate quantities and composite rates should be adopted to shorten the time to do the estimate.
6. It is possible that the design may eventually not be adopted or may be further modified.
7. It will be a waste of time if the estimate is prepared in great details like valuing a variation formally but is not really so accurate that at the end of day the estimate cannot be used as the formal valuation.
8. Buffer for agreement with the Contractor should be allowed.
9. AI pre-approval forms may need to be signed before an Architect’s instruction is authorized to be issued for the proposed changes.
10. The Contractor may also raise claims, which require QS to report to the Employer the probable costs of those claims.

Prepare Financial Reports at regular intervals

1. QS needs to prepare Financial Reports at regular intervals (usually monthly) to report on the latest situation of all the possible adjustments to the Contract Sum.
2. The reports serve as a register of instructions issued, potential variations, claims received, etc.
3. The reports should have columns to show the latest of each of the following:
   • amounts estimated by QS – with buffer for budgetary purposes; not known to the Contractor; can be viewed as the maximum payable
   • changes since the last report
   • amounts claimed by the Contractor
   • amounts assessed by QS – formal amount notified to the Contractor; can be viewed as the minimum payable
   • difference from amounts claimed
   • e.g.:
     
4. The reports should also show the status of the items, such as:
   • tentative based on claim
   • estimated (some measurement)
   • no cost effects
   • assessed (detailed)
   • agreed
   • original
   • e.g:
     

Prepare cash flow tables

1. QS may be required to prepare cash flow tables regularly or ad-hoc to indicate the likely amounts of payments required to be made by the Employer so that he may prepare for funding.
2. Care should be made to adjust for the difference between the time of progress and the time of actual payment.
3. A comparison between the cash flow graph prepared based on the baseline master programme and the latest actual flow graph can be a good visual indication of whether the progress is ahead or behind the programme (measured by the value of the Works).

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