This report is in response to the directions on the part of the commercial department of ABC Corporation towards assessing the financial status of the project concerning the construction of offices and yards for the Rus Ting Metal Stockholders plc, Contract no…
As per my observations, I have proposed a number of actions that could be taken by the company in the near future.
The findings of my analysis are explained one by one. The project as per contract No.205 is for a total sum of 10,000,000 and has been prepared under the JCT 98 format. Initially, the company had calculated the internal budget for the project and had projected it at 9,500,000, out of which 750,000 was allocated for package contracts. the project is still ongoing and has been facing some problems of late, which will be discussed in the forthcoming paragraphs.
From the existing financial records, the total cost of the project incurred by the company has so far been close to 6,750,000, out of which 6,200,000 was spent on paying the package contractors and suppliers. However, the amount that has been obtained from the client since the commencement of the project has been to the tune of only 5,850,000, which means that the company has spent an extra amount of 900,000 on this project. In fact, it can be seen that the spending of the company has been more directed towards the package contracts and has in fact been more than the income that has been obtained from this project so far. This suggests that the company has not been efficient enough in monitoring the deficit, which has resulted in an extra investment of nearly a million pounds into the project that is yet to be cleared by the client.
Apart from this, I have calculated the ...
Apart from this, I have calculated the retention ratio at 10%, which is usually deemed quite less, especially for bigger projects such as these. At present, the company owes around 300,000 to the package contractors, out of which around 100,000 meant for a contractor has become insolvent. This leaves the existing dues to the package contractors at 200,000.
I would like to note here that the situation on the part of the client has not been encouraging in terms of their financial performance during the past year. The shares of Rus Ting plc have not been performing well and their value has dropped by as much as half of their value. The poor performance of the client can be further reflected by the fact that they are yet to pay their certified installment due last month. To make matters worse, bad weather over the past few months has been constantly hampering the smooth flow of work at the construction site.
The major concern of the company at the present moment is with regards to the time of completion of the project. By taking various factors into account, it has been estimated that the project would be completed three weeks behind schedule. Under such a situation, the company would have to pay up to 90,000 under Liquidated and ascertained damages to the client. Thus, it can be seen that apart from the outstanding costs that have been incurred by the company, another danger still looms large if no immediate steps are taken to bring about a change in the company's strategy and practices.
Apart from these problems that the project is facing at the moment, there have been various other problems that have been hampering the progress of the project from time to time. ...
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