Having real-time, trustworthy, and traceable solutions to manage, monitor, evaluate and report the current status of project finance is a must requirement for all entities involved in the project finance process, including, for example, Project Sponsor, Senior and/or Mezzanine Lenders, Financial Advisors, Technical Advisors, Legal Advisors, Equity Investors, Export Credit Agencies, Insurance Providers, Hedge Providers among others. The type of information and level of detail to be displayed in the finance report could vary from one entity to another depending on what matters to them most and who is authorized to view the report. Still, regardless of who is viewing the report, the report information should be based on a single trustworthy, auditable and traceable data source.
Using a Project Management Information System (PMIS) like PMWeb, all information needed to have a consolidated project finance report will be captured on a single platform. The PMWeb default out-of-the-box modules required to achieve this desired consolidated finance report can be grouped into four categories. The first category relates to the modules that will be used to capture the information that was the basis for having a bankable project for which funding was secured and which will be authorized to be expended against the approved actual cost incurred, the second category relates to the modules that will be used to manage all cash out records for which the secured funding will be released, the third category relates to the modules that will be used to manage all money in records which will be used to repay the provided funding and the last and fourth category include the modules that will be used to capture the actual release of payments made against approved progress invoices on the project as well as actual income or payments received against approved revenue invoices.
All transactions for each one of those modules will have all supportive documents uploaded and stored in the PMWeb document management repository before they are attached to their relevant records. In addition, the attachment tab will be used to link other PMWeb records like risk registers, among others, and connect relevant imported MS Outlook emails. Further, each module will have a workflow to formalize the process for reviewing and approving each transaction. The workflow will include the requirements for approval-level authorities which could depend on the transaction value.
The consolidated project finance report will be structured using the cost breakdown structure (CBS) defined in PMWeb, a required field of all modules needed to manage, monitor, evaluate and report on the project finance status. The cost breakdown structure will include levels to enable grouping, summarizing, and filtering of data based on the report reader’s requirement.
Bankable Project
A bankable project is a project that has sufficient collateral, future cash flow, and a high probability of success to be acceptable to lenders for financing. The project baseline budget should capture all those details, including details of contingencies, management reserve, and anticipated revenue. In addition, there will be a need to capture details of any future changes to what has been agreed on by using a formal budget request process. PMWeb budget and budget request modules will capture those details across the project’s delivery periods.
PMWeb will also capture details of all project finance fund sources and all changes to those approved funds. The authorized fund releases from the fund sources will be associated with the relevant budget line items to ensure that provided project funding is aligned and covers the approved project budget. In addition, the authorized fund releases should be aligned with the awarded commitment agreements’ relevant line items. PMWeb fund sources, requests, and authorization modules will be used to capture this information.
Cash Out
The actual costs incurred on a capital project could result from the commitments awarded to the construction contractor, subcontractors, suppliers, and operators, among others. An original commitment agreement could be subject to change orders, which will be used to calculate the revised contract value when approved. The projected commitment agreements’ value will equal the revised contract value plus all change orders pending the project owner’s approval. Progress invoices will authorize payments against the completed and approved scope of work. PMWeb commitment, change orders, and progress invoices modules will be used to capture this information.
PMWeb timesheet module allows charging hours that were worked as regular hours, overtime hours, weekend hours, and holiday hours for which each could have a different rate than the others per resource. The PMWeb timesheet module will also charge the costs associated with the professional service’s resources that are not covered in commitments or miscellaneous invoices. For non-commitment actual costs, the PMWeb miscellaneous invoices module will capture those cost items.
Cash In
The anticipated project revenue or income will be captured using the PMWeb contracts module. Those could be contracts for selling the completed project’s assets and long-term release agreements with corporate tenants. All changes to the revenue contracts will be captured in the PMWeb contract change order module, while the PMWeb Requisitions module will be used to issue invoices due from customers.
Accounts Payable and Accounts Receivable
For all actual payments made against approved commitment progress invoices and miscellaneous invoices, the PMWeb Accounts Payable module will be used to keep details of all those payments. Similarly, all payments received against revenue contracts, like the sale of assets and long-term lease agreements, will be captured in the PMWeb Accounts Receivable module.
Other Relevant Information
PMWeb procurement module allows comparing the received bids and completing the commitment award process. In addition, PMWeb provides additional modules that could be used to capture more details that could be of interest to those entities involved in the project finance. For example, the PMWeb cost estimate module will capture the details of how the project’s estimated cost and revenue were established. Those estimates can be created in PMWeb or imported from MS Excel files. In addition, the PMWeb procurement and online bidding modules can be used to manage the procurement of all awarded commitments and align them with the approved project cost estimate.
The information captured in those modules will become a single trustworthy data source to provide a 360-degree consolidated project finance report. The report will provide details on the baseline budget. All approved transfers and adjustments, revised budget, originally approved funding, funding changes, revised funding, awarded commitments, approved changes to commitment, revised commitments, pending changes to commitment, projected commitment, percent complete, invoiced to date, non-commitment costs from miscellaneous invoices and timesheets, total actual cost to date, revenue contracts signed, approved changes to revenue contracts, revised revenue contracts, pending changes to commitment, projected revenue contracts, percent complete, revenue invoiced to date, actual payments made against approved progress invoices and miscellaneous invoices and actual income received against invoiced revenue contracts. All this information will be reported against the defined cost breakdown structure levels set for the project.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM, is a Senior Project Management Consultant with over 35-year service record providing project management and controls services to over 100 projects with a total value of over US $5 Billion. Those projects included Commercial, Residential, Education, and Healthcare Buildings and Infrastructure, Entertainment and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication, and Information Technology projects. He is thoroughly experienced in project management, including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training, and business development.
Bassam is a frequent speaker on Project Management, Strategic Project Management, and Project Management Personal Skills. Over the past 35 years, he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe, and South America. He has written more than 250 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for over six years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), an accredited Planning and Scheduling Professional (PSP), an Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE), and a Green Project Management (GPM).
Bassam holds a Master’s in Engineering Administration (Construction Management) with Faculty Commendation from George Washington University, Washington, DC, USA, Bachelor in Civil Engineering – from Kuwait University, Kuwait, and has attended many executive management programs at Harvard Business School, Boston, USA, and London Business School, London, UK.