Higham A., Bridge C., Farrell P. Project Finance for Construction

New York: Routledge, 2017. — 399 p. — ISBN 978-1-138-94129-8.The world of construction is intrinsically linked with that of finance, from the procurement and tendering stage of projects right through to valuation of buildings. In addition to this, things like administrations, liquidations, mergers, take-overs, buy-outs and floatations affect construction firms as they do all other companies. This book is a rare explanation of common construction management activities from a financial point of view. Whilst the practical side of the industry is illustrated here with case studies, the authors also take the time to build up an understanding of balance sheets and P&L accounts before explaining how common tasks like estimating or valuation work from this perspective. Readers of this book will not only learn how to carry out the tasks of a construction cost manager, quantity surveyor or estimator, they will also understand the financial logic behind them, and the motivations that drive senior management. This is an essential book for students of quantity surveying or construction management, and all ambitious practitioners.List of figures

Pre-contract financial management
Project appraisal and developing the business caseOrder of cost estimate
Cost planning
Preparing and pricing bid documentsModel answers to discussion points
Model answers to exercisesProcurement systemsRisks
Employer objectives
Four pragmatic high risks in procurement systems
Costs that arise if projects are completed late; who pays?
Other risks
Integrated or separated teams
Methods of agreeing prices; inviting bids and e-tendering
Procurement categorisation
Lump sum methods of procurement
Management contracts
Partnering and frameworks
Prime contracting and the private finance initiative (PFI or PF2)Model answers to discussion pointsElements of a contractor’s bid
The decision to bid
Performance bonds
Project insurance
Collateral warranties in construction
Pricing other risks
Contingency sums
Provisional sums
Prime cost or PC sums; nominated subcontractors and suppliers
Daywork in tender bids
Fixed/firm price or fluctuation
Subcontractors
Preliminaries and the tender programme
Plant; hire, buy or subcontract
Discounts
Company head office overheads
Company profits
Model answers to discussion points
Model answers to exercises
Model answers to tasksDesign and consultancy teams managing finance and risk for employersCost prediction accuracy
Value management and value engineering
Risk management
Establishing project cashflow – the perspective of employers
Managing consultancy income and contracts with employersModel answers to discussion points
Model answers to exercisesValuations and interim payments
Introduction to interim payments
Elements of the valuation (employer to main contractor)
Retention
Example interim payment valuation
Model answers to discussion points
Model answers to exercisesPost-contract
Contractors’ cashflow introduction
Assuring payments on time
Predicting the cashflow of projects
Multiple project cashflows
Cashflow in private housebuilding
Using cashflow projections to forecast turnover
Employment of labour; direct, indirect (self-employed) and subcontracting
Incentive schemes or fixed pay?
Cost control
Dayworks
Combining the effect of cashflow and profits/losses
Model answers to discussion points
Model answer to exercise
Model answers to tasksFinancial management post practical completionFinal accounts
Budgets for life cycle and maintenanceModel answers to discussion points
Model answers to exercisesCapital investment appraisalNon-discounting methods for simple projects
Discounting methods of appraising capital investment projects
The time value of moneyPresent value table
Model answers to activities
Capital investment appraisal – further considerationsRelevant costs and revenues
Projects with unequal lives
Inflation
TaxationModel answers to questions
Corporate accounts
Interpretation of accounts
Income statement (pro forma)
The statement of financial position (balance sheet)
Equity and liabilities
Raising capital and managing liquidity
Capital for small- and medium-sized enterprises
Equity finance
Raising capital for larger organisations (PLCs)
Working capital – liquidity management
Acquisitions and mergers