Cost valuation reconciliation. When Usually commences after the external valuation Time dependent...

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.

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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


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Documentation used

• External valuation– Identification of:• Overmeasure• Undermeasure• Variations in dispute• Claims in dispute• Materials on site• Undercertification


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Information flows


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Documentation (contd.)

• Overmeasure schedule• Undermeasure schedule• Subcontractor liability build-up• Architects/Engineers certificates• Contra charge invoices


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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”


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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


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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


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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


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Cost statement


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Adjustments for work in progress


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When to report a loss?


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Internal and external bills


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Adjustments

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

To production: Please change “cummulative and cut off” to “cumulative and cutoff”.

A more complex example

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Discussions at CVR meeting

• Profit release• Cash flow• Turnover• Items in dispute– Variations– Claims

• Items for management action


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Cost valuation reconciliation. When Usually commences after the external valuation Time dependent...

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