Essays on Commercial Management of Projects, Procurement and Contracting Assignment

Tags: Cash Flow
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The paper "Commercial Management of Projects, Procurement and Contracting" is an outstanding example of a management assignment. The costs featured in the project's accounts reflect the overall costs incurred in running the project from its conception to termination. Project costs include labor costs in the form of wages and salaries, materials costs, overhead expenses, among other undertakings that consume the project’ s finances (PMI 2008 p. 407). In the case of Resortlife, the following are the major costs that require stating: Item Amount Assumption Labour costs Project manager Project team Engineer 130800 32700 8800 The project manager assigned a daily rate as a compensation scheme for a period of 109 days.

The assumption here is that the project manager performs a standard job on these days and that he offers services for only the budgeted days. The assumption here is that the services of the manager are worth a standard value regardless of the amount of work performed on various days. Overtime payment adjustments assume a similar apportionment of wages as the standard hourly rates. Materials and other costs Soil investigation Supply of PCC M25 Supply of Fe500 steel Supply of RCC 285000 286000 7268000 7551580 These include the costs of all the materials necessary for the execution of the projects.

The assumption is that the delivery of all the units listed occurred and in good condition hence, no defects or returns made. Interest on bank loan 191562 This appears as a sum of the installments paid in regard to the bank loan. The assumption here is that the payments were made during the financial year and that none of the payments represented accruals or prepayments. The assumption, in this case, is that there is no change in the interest rate, which may necessitate the adjustment of the interest amounts upwards or downwards. Shuttering 81400 Delivered and paid during the financial year hence they indicate costs for the current financial year PVC conduit placing 57900 Completion of the paid work to be conducted by the end of the year and therefore the costs reflect project costs for the current year Curing 38000 Completion to be made by the end of the year Steering committee travel expenses 21000 Incurred during the year hence form part of the costs for the year Steering committee salary equivalent 16667 Incurred within the current financial year hence the inclusion Transport and accommodation 6400 We assume that Resortlife caters for the transport and accommodation costs incurred in the course of conducting official business.

It, therefore, absorbs costs incurred by the entrepreneur after flying from Fiji. Shipping costs 3500 The project caters for the shipping of materials ordered from another country. The costs were incurred during the year hence they require inclusion in the current year’ s accounts Custom-made glazed tiles 230000 The transaction is completed within the financial year so that the payment is not deemed an accrual but cost incurred during the financial year Architect fees 90000 The recorded figured includes the payments made within the year and if any amount remains unsettled, it appears on record as accruals that were paid during the following financial year Environmental study costs 207000 The study was for the benefit of the project execution hence the costs form part of the overall project costs.

The payment was made during the current financial year hence the inclusion as part for the project costs Drainage costs 350000 The activity is necessary for the performance of the project hence the inclusion in the project’ s overall costs. It is important to record the overall drainage costs to indicate the remaining work for completion within the following financial period.

The balance of (350000-120000) is also indicated for further calculations Work completed 120000 This is the value of the portion of work completed at the end of the financial year which forms a proportion of the overall work hence the remaining work for the following year can be determined Question 2 Cash flow relates to the movement of cash and cash equivalents into and out of the business because of transactions that the firm undertakes. Cash inflows are the activities that generate income while cash outflows lead to the flow of cash from the account.

These transactions affect the liquidity position of the business since they determine its capacity to meet its current liabilities (PMI 2008 pp. 408). Liquidity problems may hinder the business from undertaking crucial activities for its execution such as the acquisition of raw materials and payment of labor. The actual construction commenced on 8 April, which marks the beginning of the execution phase of the Resortlife project. In May, the project receives funds in the form of loans and internal funds that increase the cash flow of the project (PMI 2008 p. 407).

The project makes a payment of an interest rate installment of 10521 in May and another in June of 72329. Payment of interest rates reduces the project's cash flow since it uses funds to make these payments. Payment of the earth moving contractors economically reduces the costs incurred during construction but reduces the cash flow (PMI 2008 p. 410). The contractors offer reduced fees if payment is made within 29 days, which translates into discounts. Despite the attractive offer, making any payment to them within the stipulated period reduces the cash flow of the project. Making payments for the custom-made glazed tiles in advance has an implication on the cash flow by reducing it unnecessarily.

The payment is made 6 months in advance for tiles only required in the future at the final stages of the construction project for the pool area. The prepayment hence makes an unnecessary reduction in the cash flow, which is possible to avoid through credit payments (PMI 2008 p. 407). Payment of the 3500 shipping costs for the tiles also reduces the cash flow.  

References

PMI (2008), A Guide to the Project Management Body of Knowledge, 4th edn. Project Management Institute, Newtown Square, PA.

Walker, D. & Hampson, K. (Eds.). (2003). Procurement systems and structures, in Walker, D. & Hampson, K. (Eds.), Procurement Strategies: A Relationship-based Approach, Blackwell, UK, 11-29.

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