12 Project Financial Management

12.1 Introduction

Previous chapters have discussed the essential elements of construction time, cost, and resource control. One additional major feature of the project management system remains to be treated: financial control. The project manager bears the overall responsibility for financial management of the work. This includes carrying out such fiscal duties as may be imposed by the construction contract and implementing appropriate monetary procedures according to the dictates of good business practice. Project financial management can involve a broad range of responsibilities.

Learning objectives for this chapter include:

  • Understand the broad financial responsibilities of the project manager.
  • Recognize the variety of ways in which progress payments are made, depending upon the specific type of contract.
  • Recognize the importance of cash flow to the contractor and how the project manager can positively (or negatively) impact project cash flow.
  • Understand the importance of properly managing the change processes.

12.2 Financial Control

Construction contracts normally require that contractors perform prescribed duties of a financial nature. For example, they are made responsible for certain aspects of the payment process. This can include project cost breakdowns, the forecasted schedule of progress payments, preparation or approval of periodic pay estimates, and documentation required for final payment. Construction contracts prescribe specific ...

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