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.
WT Partnership, Sydney