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CE 403 - Construction Management Assignment No.1: Major Activity Value (Rs. Million) Months

The document provides information about a construction contract worth Rs. 240 million taking place over 9 months plus a 3 month defects liability period. It includes a schedule of major construction activities and their values totaling the contract sum. Payments will be made as lump sums for completed activities each month, with 1/6 retained as retention until months 9 and 12. A Rs. 60 million mobilization advance is provided upfront and deducted from payments. The contractor assumes a 20% profit margin. Students are asked to (1) prepare a cash flow statement for the contract making any assumptions, and (2) calculate the minimum finance charges if the contractor borrows at 3% monthly interest to maintain positive cash flow.

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11 views

CE 403 - Construction Management Assignment No.1: Major Activity Value (Rs. Million) Months

The document provides information about a construction contract worth Rs. 240 million taking place over 9 months plus a 3 month defects liability period. It includes a schedule of major construction activities and their values totaling the contract sum. Payments will be made as lump sums for completed activities each month, with 1/6 retained as retention until months 9 and 12. A Rs. 60 million mobilization advance is provided upfront and deducted from payments. The contractor assumes a 20% profit margin. Students are asked to (1) prepare a cash flow statement for the contract making any assumptions, and (2) calculate the minimum finance charges if the contractor borrows at 3% monthly interest to maintain positive cash flow.

Uploaded by

Mohamed
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CE 403 - Construction Management

Assignment No.1
A civil engineering contractor has undertaken to carry out a project for a contract sum
of Rs. 240 million. The contract duration is 9 months and the defects liability period is
3 months. The construction schedule and the value of each of the major activities are as
given in the following figure:

Major
Activity

Months

Value
(Rs. million)
1

Activity - A
Activity - B
Activity - C
Activity - D
Activity - E
Activity - F

48
60
54
36
30
12
240

According to the contract, payments will be made as lump sum amounts for each
completed major activity after a period of 30 days. An amount equal to 1/6th of the
above lump sum amounts for each major activity will be deducted as retention money
from each lump sum payment upto a maximum of 10% of the contract sum. 50% of the
retention money will be paid at the end of the contract period (9th month) and the
balance 50% will be paid at the end of the defects liability period (12 th month). A
mobilization advance of Rs. 60 million is paid to the contractor at the beginning of the
contract. The mobilization advance will be deducted from the 1st and 3rd lump sum
payments at the rate of 50%. Assume that the contractor has included a profit margin of
20% on top of his total cost in the value of the contract sum.
(i) Using the above data prepare a cash-flow statement for the above contract. State
any assumptions made. (80% marks)

(ii) If the contractor needs to borrow money from the bank at an interest rate of 3%
per month, what would be the minimum total finance charge incurred by the
contractor to maintain positive cash flow. (20% marks)

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