Summary: Project Finance Flashcards Mrics L3

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• 1 Project Finance Flashcards MRICS L3

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• IQ1: ASSESSOR Q — How do you control project costs against budget? (Project Finance L3)

  APPROACH: Establish cost baseline → monitor → report → act. I establish a cost plan at project outset, allocate budgets by work package, and monitor monthly via cost reports comparing actuals vs budget. I use EVA (CPI/SPI) to forecast final outturn, track contingency drawdown against the risk register, and report variances with corrective actions to the client. On Al Ula, I identified a PS budget overrun risk early and coordinated with the client to resequence scope, protecting the overall project budget.

• IQ2: ASSESSOR Q — What is the difference between a Defined and Undefined Provisional Sum? (Project Finance L3)

  Defined PS: Sufficient scope information provided at tender for the Contractor to programme the work and include time-related costs. Undefined PS: Insufficient scope at tender — the Contractor cannot plan for it; the Engineer must give notice before instructing expenditure or the Contractor may be entitled to EOT and additional cost. On my Al Ula project, PS items were classified as Defined but lacked full scope definition, which created programme risk when instructions arrived late — causing a 6-week delay to the Power on Site milestone.

• IQ3: ASSESSOR Q — Explain Earned Value Analysis and how you have used it in practice. (Project Finance L3)

  EVA integrates scope, cost, and schedule using three metrics: PV (planned value), EV (earned value), and AC (actual cost). CPI = EV/AC measures cost efficiency; SPI = EV/PV measures schedule efficiency. I used EVA on my project to identify that the power infrastructure work was behind schedule (SPI <1) three months before the critical milestone. This early warning allowed the PM to accelerate procurement and redeploy resources, avoiding a larger delay. EAC = BAC/CPI gave the client a reliable forecast of final outturn cost.

• IQ4: ASSESSOR Q — What are the key components of a Final Account? (Project Finance L3)

  A Final Account comprises: (1) Original Contract Sum; (2) Instructed and agreed Variations (additions and omissions); (3) Provisional Sum expenditure net of unspent balances; (4) Fluctuation adjustments where applicable; (5) Remeasured quantities on re-measurable contracts; (6) Agreed claims and commercial settlements; (7) Retention release schedule. On my project, I prepared interim Final Account statements quarterly to ensure all variations were captured incrementally rather than leaving a large reconciliation at project close.

• IQ5: ASSESSOR Q — How do you manage Provisional Sums on a project to protect the programme and budget? (Project Finance L3)

  My 4-step approach: (1) At tender, identify all PS items, assess programme risk, and flag undefined items to the client with a risk mitigation plan; (2) Proactively seek early Engineer instructions — do not wait until PS items are on the critical path; (3) Where possible, obtain competitive quotations to ensure value for money and budget compliance; (4) Track PS expenditure separately in the cost report and record all instructions formally for Final Account purposes. On Al Ula, I raised an early warning 3 months before the Power on Site milestone, which partially mitigated the delay risk.

• RR1: What does CPI of 0.85 mean on a project?

  CPI (Cost Performance Index) = EV/AC = 0.85. This means the project is spending £1.00 for every £0.85 of value earned — the project is over budget. Corrective action required: review cost-to-complete, reduce waste, renegotiate subcontracts, or seek client approval for budget increase.

• RR2: What is the NEC notification period for Compensation Events?

  8 weeks from when the Contractor became aware (or should have become aware) of the event. Failure to notify within 8 weeks bars the Contractor from claiming additional time or money for that event (Clause 61.3).

• RR3: What % quantity change triggers FIDIC rate adjustment?

  >10% change in measured quantity vs BoQ quantity, provided the other three conditions are also met: the change × rate exceeds 0.01% of Accepted Contract Amount; it directly alters unit cost; and the item is not a fixed-rate item.

• RR4: Name the 5 NRM1 risk allowance categories.

  1. Design development risk; 2. Construction risk; 3. Employer's change risk; 4. Employer's other risk; 5. Contractor's risks. Applied as % additions to the construction cost plan at each RIBA stage.

• RR5: What is Cost Value Reconciliation (CVR)?

  A contractor's internal cost control tool comparing actual costs incurred against the value of work completed (certified or anticipated). Used to identify profit or loss position at each monthly reporting period. Helps the contractor manage cash flow and subcontract performance.