Association of Cost Engineers. NEC: Option C Cost Audits

Transcription

1 Association of Cost Engineers NEC: Option C Cost Audits

2 NEC Option C Cost Audits NEC Audit Provisions NEC Payment Provisions Audit Objectives Audit Plan Audit Considerations Implementation of Audit Plan Rolling Programme of Cost Audits Potential Audit Problems

3 Solomons Europe Limited Solomons Europe is a Chartered Quantity Surveying Practice Established in 1998 Provide support to UK s Major EPC and Industrial Services Contractors

4 Solomons Europe Limited Specialise in

5 NEC AUDIT PROVISIONS NEC ECC Option C Target contract with an Activity Schedule

6 NEC AUDIT PROVISIONS Contract Clause No express reference to cost audits in the NEC 52.3 Contractor allows the PM to inspect accounts and records required to be kept at any time within the working hours

7 NEC Payment Provisions (50.1) Project Manager assesses the amount due Price for Work Done to Date Defined Cost + Fee

8 NEC Payment Provisions Defined Cost = Option C: Payments due to Subcontractors and The cost of components in the Schedule of Cost Components

9 NEC Payment Provisions Payment timescales 51.1 PM certifies a payment within one week of the assessment date Hence, high level review of any application with more thorough audit in the following weeks Any audit findings are then incorporated into next PM assessment of amount due

10 Audit Objectives Audits ensure costs paid are Accurate Allowable and Appropriate

11 Audit Plan Managing Reality Book Two: Procuring an Engineering and Construction Contract: Appendix 3: Audit Plan

12 Audit Plan The audit process should be detailed in the Works Information

13 Audit Plan Audit Task Sections Monthly Report People Equipment Plant & Materials Charges Manufacture & Fabrication Design

14 Generally Audit Considerations Specific contract provisions Have payments actually been made? - access to bank statements Allocation to correct cost codes / WBS

15 Subcontractors Audit Considerations Pre-appointment Order placed in accordance with any Works Information requirements

16 Subcontractors Audit Considerations Post-appointment Properly administered Change control Assessment of PWDD Payments made within timescales Final accounts reflect contract

17 People Audit Considerations Place of work: Working Areas: used only for this contract Time capture procedure Payslips (weekly & monthly) Payroll burden: per Schedule of Cost Components

18 Equipment Audit Considerations Rates: reflective of current market rates (whether internal or not) Idle plant Purchased Equipment Maintenance / repair

19 Audit Considerations Plant and Materials Orders Goods received notes Invoices Payments Check quants required v quants delivered

20 Charges Audit Considerations Costs necessary to carry out the works Costs included in Working Area overheads / people overheads are not also included elsewhere

21 Audit Considerations Manufacture and Fabrication Outside the Working Areas Should be agreed and form part of the Contract Data wholly or partly designed for the works

22 Design Audit Considerations Outside the Working Areas Should be agreed and form part of the Contract Data Rates x hours + travel to Working Areas

23 Rolling Programme of Cost Audits Plan to cover 10% of cumulative costs Plan to audit each major cost element Element audit schedule to reflect programme Frequency of element audits reflect relative values Some elements may warrant a monthly audit: e.g. prelims, staff costs

24 Potential Audit Problems Vagueness of the Schedule of Cost Components Non-availability of substantiating information may result in reduced payments

25 Potential Audit Problems Ability to audit down the supply chain where no direct contractual relationship exists Reluctance to provide commercially sensitive substantiating information / Data protection (!) Where the supporting information is held

26 Summary Vital for Contractors (and subcontractors) to keep full and organised records relating to costs to demonstrate validity and appropriateness Audits are a pragmatic way of ensuring accurate allowable and appropriate costs are reimbursed

27 Summary Successful audits create commercial confidence for both parties throughout the project Successful audit outcomes assist early settlement of final accounts

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