Cost valuation reconciliation. When Usually commences after the external valuation Time dependent upon the complexity and size of project Usually takes.

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Presentation transcript:

Cost valuation reconciliation

When Usually commences after the external valuation Time dependent upon the complexity and size of project Usually takes two weeks to complete Discussed at Monthly CVR meeting © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 2

Fundamental principle Prudence Match expenditure with income Uses the application for payment and the architects certificate to substantiate the valuation/Net sales value of the works © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 3

Documentation used External valuation – Identification of: Overmeasure Undermeasure Variations in dispute Claims in dispute Materials on site Undercertification © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 4

Information flows © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 5

Documentation (contd.) Overmeasure schedule Undermeasure schedule Subcontractor liability build-up Architects/Engineers certificates Contra charge invoices © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 6

Definitions Overmeasure – Claimed-Unpaid – Claimed-Paid Definition-“Application for monies in advance of their eligibility” Undermeasure Definition-“Work completed that costs have been incurred for but haven’t been included in the application for payment” – Measured works – Variations Work in Progress Definition-“Work that has been carried out in the period between the cost cut-off date and the valuation date” © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 7

Basic principle Net sales value uses the application for payment as the baseline Application adjusted as follows: – Overmeasure – Deducted – Undermeasure - Added – Materials on site - Deleted © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 8

Basic principle Net sales value uses the application for payment as the baseline Application adjusted as follows: – Overmeasure – Deducted – Undermeasure - Added – Materials on site - Deleted © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 9

Documentation supporting the CVR Internal valuation broken down into a set of allowances Overmeasure schedule Undermeasure schedule Cost statement Subcontractor liabilities Buying reconciliation Materials reconciliation Cost to complete exercise Estimated final account/profit margin Architects/Engineers certificate Narrative explaining variances © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 10

Cost statement © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 11

Adjustments for work in progress © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 12

When to report a loss? © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 13

Internal and external bills © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 14

Adjustments © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 15

Simplified CVR pro forma © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 16

A more complex example 17

Discussions at CVR meeting Profit release Cash flow Turnover Items in dispute – Variations – Claims Items for management action © 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd. 18