Banks, developers, clients and receivers may, for one reason or another, require a Quantity Surveyor to assess the Cost To Complete (CTC)on a project.

Broadly, a CTC report determines the cost to complete a project and ascertains if there are sufficient funds to complete the development under the current contractual arrangements.

Some examples of when a CTC maybe required are:

  • When a Developer defaults on his loan and the Bank needs assistance with whether the project should be completed or sold
  • Where the Bank as part of the loan facility requires monthly drawdown reports which are assessed on a CTC Basis
  • Where a Builder becomes insolvent and a receiver is appointed. The CTC is useful when understanding the additional funds and time required to complete the project
  • When a Builder’s Building Contract is terminated and an assessment is carried out of the value of the works completed on site together with a forecast of the anticipated cost to complete the works.

Depending on the circumstances of the request for a CTC some of the issues which a Quantity Surveyor should consider are:

  • Obtain, review and understand the contract documents
  • Undertake a measured estimate of the cost to complete based upon the current proposed scheme
  • In understanding the cost of works complete and to complete review, base the cost on competitive market conditions assuming competitive tenders will be called from a number of suitable contractors
  • Understand the delivery methodology i.e. design and construct or lump sum build only
  • Review all approved and pending variations
  • Review the construction programme, cashflow, securities and bank guarantees
  • Obtain confirmation that the works completed to date have been constructed in accordance with the contract drawings and documents, specifications, authority requirements, and Australian Standard Codes
  • Obtain from the design team a schedule of defective works (this is usually in the form of statutory declarations from the consultant)
  • Consider the status of all payments including contractor, suppliers, sub-contractors, consultants etc
  • Ascertain whether the cost to complete is to include Developer’s Costs such as statutory, marketing, selling costs, development management/project management fees and financing costs etc.

When we are requested by either a Bank, Developer or Receiver to assess the cost to complete on a project we need to consider a number of issues. Before commencing with a CTC assessment discuss the particular request with one of our Associates or Directors to determine the most effective way forward.

Darren Faugust
Associate
WT Partnership, Sydney