MONTHLY CONTRACT COST AND VALUE REPORT

PURPOSE
The Monthly Contract Cost & Value Report (CCVR) is designed to facilitate overview monitoring
of the project against the current forecast at a Senior Management level.
1

GENERAL
1.1

The CCVR Report encompasses a full reconciliation of the cost the project has
incurred and the allowances generated for the quantity of work actually executed.

1.2

The mandatory reports for Senior Management review the cumulative cost and
allowances to date for the project against the Forecast and highlights trends and
exceptions to the same.

1.3

The project team will be focused on the monthly performance of the project. Clearly
the results should reflect the position they anticipate from the results of the cost
control procedures implemented and monitored.

1.4

The CCVR should not be relied upon or used as a substitute for project cost control
procedures. Clearly by the time the report is issued a significant expenditure will have
occurred which cannot be corrected.

1.5

The report and the identification of trends and exceptions rely upon the quality of the
Forecast prepared and correct allocation of cost and allowances to the forecast.

COST CODING
2.1

At commencement of the project the cost codes for monitoring the projects
performance should be identified- see copy attached

2.2

The objectives of setting project specific cost codes are:

(i)
(ii)

(iii)

(iv)

to sub-divide the total value of the project into smaller parts for monitoring.
to convert the standard S curve expenditure encountered on any project
into elements which are closer to straight line expenditure for ease of
monitoring.
to establish cost codes which encompass a series of site operations or
group of work items in a bill of quantities and which are readily identifiable
to membe rs of the project team.
to achieve a simple cost coding structure to which resources are in the main
dedicated simplifying allocation and minimising misallocation and
administration.

2.3

The cost codes will commonly consist of a matrix of resource and work type (two
levels of code).

2.4

On occasions, a third level of location may be appropriate for instance where a project
consists of several remote locations. When required, careful consideration should be
given as to whether location is applied to only directs or to both direct and indirect
allowances and costs.

2.5

Only on minor projects or cost reimbursement forms of contract is it envisaged that

cost coding on the basis of resource only (one level), will be applied.

2.6

In general, the number of cost codes should be kept to the minimum necessary to
effectively monitor the project. A proliferation of costs codes leads to misallocation,
additional administration and a level of detail not conducive to over view management
of the project.

2.7

Where detailed feedback is desirable for estimating purposes such data can be more
efficiently and accurately obtained outside a project cost coding system by the
utilisation of appropriate method study and work- study techniques.

GENERATION OF ALLOWANCE TO DATE

3.1

It is the responsibility of the Project QS to accurately generate allowances. This will

require accurate measurement of the works executed.

3.2

Measurements will normally be based upon those prepared for payment adjusted for
the Interim Payment Application adjusted for known over and under measurements.

3.3

The generation of Allowances to date is considered under five headings:

3.4

(i)

Direct

(ii)

Indirect

(iii)

Variations

(iv)

Materials Unfixed

(v)

Contribution

Direct
For projects where the Contract is on the basis of re-measurement, allowances are
generated from the internal quantities (actual quantities) of work executed to the
relevant period end multiplied by the resource allowances.
The resource
allowances are those established at tendering.
The allowances are not to be adjusted. They may be reallocated (from one
resource type to another) or further sub-divided for monitoring purposes.
Allowances for variations (other than purely quantitative variations) are to be set as
per Clause 4 Item 4.6 (c) below.
For Projects where the contract is on a lump sum basis allowances are to be
generated on the basis of quantities factored by the ratio which the fixed quantity in
the Contract bears to the most recent assessment of the actual total quantity to be
executed.

3.5

Indirects
These are all the items in the general expenses or further items appearing on the
Tender Summary Sheet (TSS). Allowances are generated on a fixed, time-related
or quantity basis as appropriate. For time-related allowances the draw- down of
allowances should consider the programme period and any potential over-run.
The draw down of allowances on a shorter/accelerated programme requires
approval of the Operations Manager and Commercial Manager.

3.6

Variations
These may be purely of a quantitative nature or involve the requirement for
agreement of new rates or prices. The process for generating allowances is:
(a)

Principle
The principle that payment will be made for the item of work to be executed
must not be in doubt. If there is any such doubt the item is to be
considered to have the status of a claim for additional payment and not a
variation. No allowances are to be generated for claims unless formal
agreement has been obtained with the Employer and the matter confirmed
by the Operations Manager and Commercial Manager.

(b)

Quantity
Basis is actual quantities (Iqty, Internal Quantity).

(c)

Allowances
Allowances are to be given to the item which equate to its worth under the
Conditions of Contract.
The allowances taken clearly set the minimum rate or price to be agreed
with the Employer. Externally the target is to maximize the rate or price
(within the limits of credibility) and this is a separate exercise to setting
allowances. The cost also sets a bench- mark as to minimum recovery
desirable. However, the judgement of Worth under the provisions of the
Contract may be less than cost. Conversely abnormal profit where the
allowances determined are far in excess of cost must be considered
conservatively and highlighted to management.

3.7

Materials unfixed
Allowances generated for unfixed materials are to be on the following basis:
(1)

(2)

(3)

The quantity unfixed is established by a physical stock inspection. This

quantity is to be reduced by the greater of:
(a)

the estimators allowance for wastage (stocking, handling and fixing)

(b)

site experience of wastage incurred.

The allowance nett rate is to be the lesser of:

(a)

the unit allowance for the material when fixed

(b)

the cost of purchasing the material.

Where labour and plant is expended on site processing or manufacturing

raw materials allowances can be taken for this work on the lesser of:

(a)

The unit allowances for processing or manufacture

(b)

the cost of processing or manufacturing.

The above parameters are to ensure that:

3.8

(i)

buying gains on the material are not taken until the material is fixed in its
permanent position in the works;

(ii)

buying losses are taken as material is purchased/ delivered to site.

Contribution
This is to be drawn-down as a percentage of turn over in line with the last forecast.

3.9

Sundry Account Invoices to Third Parties

Where sundry accounts to third parties are undertaken by the Project allowances may
be generated for this work.