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