| 1.1 Portfolio
47 Construction Portfolio | |
|---|
| 11.47 Construction Portfolio: | | 1. The construction industry is unique in certain ways that demands a unique corporate strategy with multiple companies. Analysis shows that almost 20% of all construction projects fail because the client does not pay as scheduled. | | 2. To protect the shareholders from financial liabilities, a corportate structure must be used to operate each significant project via its own operating company. A management company exists for the private benefit of the shareholders, then any number of independent operating companies are used to run each significant project. |
| 2. Management Company: | | 1. The management company has two Directors, each with one share and controlling inerest as 50% of the company. An objective of the management company is never to have any losses or liabilities. | | 2. Each Director is an employee with a monthly paid salary and other benefits. Each Director has a Directors Service Agreement with a one-year rolling notice period - either Director may resign by giving one years notice to do so. The two Directors may mutually agree to disolve the company at any time with no liabilities on either Director. | | 3. The management company is paid management fees by independent operating companies for the time assigned by the Directors to an operating company. Administrative fees are also paid by the operating companues to the management company. | | 4. Each year, the two Directors are paid a dividend that reduces the net worth of the management company towards zero. Each year, each Director is expected to devote and bill 220 days of their time to any number operating companies. Each month, each Director earns 2.2 days holiday enititlement that may be accumulated within any financial year, but not carried over. |
| 3. Pension Scheme: | | 1. The management company operates a private pension scheme for its Directors. Either Director may opt-out or make whatever payments they choose to their private pension scheme. | | 2. Where a Director pays 1% of their salary to thir private pension scheme, then the company can pay 10% of their salary to their private pension scheme. Each Director makes their own pension contributions and gains their own pension benefits that are independent of the management company. All pesion contributions are free of NI an dincome tax liabilities of any kind. | | 3. When a Directors is over the age of 55 years, they are entitled to make a withdrawal from their pension scheme where the first 25% os tax free and any remaining withdrawal is taxed as normal income without any NI liability. As the very best long term savings plan, a private pension scheme has a modest annual levy paid by the company and no management fees paid by the Directors. | | 4. Unlike employees, Directors have the benefit of making whatever pension payment they choose and can make changes as and when needed. It may be possible for a Director to put the same amount into their private pension pot (without any NI and income tax) as they earn as a monthly salary before NI and income tax is deducted. |
| 4. Operating Company: | | 1. For each significant project, an operating company is formed and registered with Two Directors and a optional client representative and any number of optional key employees representatives. The operating company has 100 shares issued with each Management company Directing being assigned 26 shares and the remaining 48 shares being assigned as needed. It costs 13 pounds to form a new company, so the overhead of an operating company is manageable. | | 2. Open Book Accounting is a characteristic of every operating company where the revenue and costs are shared with the client and all interested parties on a daily basis. The client can see the revenue they pay into the operating company and can see all costs paid by the operating company as those costs are paid. By design, the client is in full control of the operating company. | | 3. The management company charges the operating company a management fee each week and an administrative fee each month. Like all costs, the client can see these costs that are necessary to run the operating company. | | 4. Where the client chooses to change the scope of the project that cause additional costs to be incurred, then the client will choose to pay those additional costs or the project will stop. When costs exceed revenue, then people cannot be paid and people will not turn up for work. The client may ensure that revenue is enough so everybody get paid or will signal the end of the project. | | 5. Where A project is undertaken in a way where costs are minimised and a profit is earned, then the client can see that profit and deserves a share of the profit at the end of the project. The client can see that they were not exploited on a project and that the actual price paid was fair and reasonable. |
| 5. Legal Status: | | 1. A private person may be a Director of any number of companies and may be an employee of any number of companies. For simplicity, the two Directors of the management company are PAYE employees and are not paid as employees of any operating company. Management and administration fees paid by operating companies to the management company fund the two Directors salary and benefit package. | | 2. Each independent operating company may have any number of Directors, but no Director is paid as an employee. An operating company does not have a PAYE payroll, but does employ contractors directly or via an agency or management company. | | 3. Just because a company has the same directors as another company does not create any contract or liability between those companies. No company owns another company and no "group" exists with group liabilities. The losses of one company cannot become liabilities on another independent company, even when they have the same Directors. |
| 6. Open and Transparent Accounts: | | 1. Every project can be operated with open and transparent accounts, even if a unique company name is not founded for the project. Every client has responsibilities that demand OHS and QMS information to be provided by the contractor. | | 2. Quality Management Service (QMS) means the diary of tasks, registration of times, deliveries, collections, minutes of meetings, DAB, etc.. The project RAMS includes the method statement as manpower activity list with daily register and weekly time summary, with costs. The diary includes the supply deliverie schedule and waste collection schedule, with costs. | | 3. Occupational Health and Safety (OHS) means the diary of documents such as TSRA, PUWER, LOLER, FIRER, etc., with hire costs The project RAMS includes the equipment list as assets that are the subject of PUWER, LOLER and other OHS reports that must be shared with the client. |
| 6. Shared Information: | | 1. A wealth of information is shared at the start of the project and then on a daily basis during the project, via an online diary. The client needs to know that their business information is always private and secure. | | 2. Start of Project: | | (1) Project RAMS that includes: | | (1.1) Assets as equipment list with HAV and hire cost information. | | (1.2) Activities as method statement with planned manpower information. | | (1.3) Supplies with delivery schedule and cost information. | | (2) Project Quote that is a variation on the project RAMS information. | | (3) Standard Terms and Conditions regarding wellbeing, welfare and 30 day payment schedule. | | 3. Daily Diary: | | (1) Register of people on-site with clock in and out times with personal checklist. | | (2) Daily Activity Briefing for team. | | (3) Task Specific Risk Assessment as Activity, Hazards, Control Measures. | | (4) Daily Delivery and Collection list. | | (5) Tasks of work done, including excavation dimensions with costs and photographic evidence. | | (6) Minutes of meeting. | | (7) Request for Information. | | (8) Inspection Reports: LOLER, PUWER, FIRER, PAT, etc.. | | 4. Weekly Progress Summary: | | (1) Manpower costs. | | (2) Equipment hire costs. | | (3) Supplies purchased costs. | | (4) Balance sheet of revenue, costs, 30 day balance. |
| 7. Why: | | 1. With almost 20% of all projects being changed by the client then the risk of a project failure is significant. The solution is to put the client in charge of the financial accounts from the start of the project so the client may change the project and change to revenue plan to match what is practical. The solution includes the ability to stop a project the moment it is no longer financially viable - and making sure the client is aware of this fact. | | 2. Open Book Accounting has been used by contractors for decades in many industries to give the client control of the clients project. Estimates of cost and revenue schedules at the begining of a project are just estimates and a method is needed for the client to be able to vary the revenue schedule to match the rate of spend. | | 3. The contractor wanting to make a fat profit will choose not to offer open book accounting and the client will choose accordingly. The client who wants to work in partnership with the contractor will demand open book accounting so the client can overlook initial work estimates and vary the work and payment schedule to match their evolving construction requirements. Not all clients know in detail what they want before a project begins. |
| Client Point of View | | 1. The construction industry is very different when viewed from the client point-of-view, rather than a contractors point-of-view. The contractor who can treat their client in the way that the client wishes to be treated will win more business and build long term relationships. | | 2. In many cases, the client is a contractor in a supply chain of contractors where each contractor would like to be self-sufficient in all trades, but will contract out specialist projects only when it is cost effective to do so. The shortage of qualified trades people ensures the long term survival of small contractors undertaking specialist projects. Large contractors able to undertake multi-million pound contracts will continue to merge and be aquired to gain skilled trades people. | | 3. The client has priorities that the contractor may never understand such as a critical future event that is not movable that makes the cost of a project not a significant factor. The client may not fully understand the scope of the project and may be flexible in the undertaking of the project depending on what is practical and cost effective. | | 4. Policy: the project exists for the exclusive benefit of the client and the contractor must do whatever it takes to ensure that the client retains complete control of their own project. |
| Quotation Purpose | | 1. A purpose of a quotation is to educate the client in the art of what is possible and what is cost effective. The client requests a quotation because a project requirement exists that the client is not able to do using their own resources. | | 2. A quotation may educate the client by offering three potential solutions with one recommended solution. It is always possible to shortern project durations by doubling the manpower and working 24*7. It is always possible to reduce project costs by using second hand parts and assigning labour only when it is not being used by other projects. | | 3. The client has the right to decide what kind of project they wish to approve besed on priorities that may never be known to the contractor. Only the client has the right to decide what is best from their point-of-view. The contractor must never decide what the client wants. | | 4. Policy: a quotation with three potential solutions and one recommended solution demonstrates capability and capacity. |
| Project Information | | 1. Projects are undertaken for the exclusive benefit of the client who need continual access to all project information including: | | (1). Activities undertaken including work force time sheets and costs in compliance with ISO 9001 Quality Management Standard. | | (2). Equipment used including inspections, hire schedule and costs in compliance with ISO 45001 Occupational Health and Safety Standard. | | (3). Supplies purchased including delivery and collection schedule with costs. | | 2. Projects are quoted and contracts agreed based on a Risk Assessment and Method Statement (RAMS) that includes the project information shown above. As the project evolves, the cost estimates are suppliemented with actual costs so variations and can be identified and reasons documented. | | 3. The project diary of daily tasks, register and daily activity briefing is consolidated into a weekly and monthly Project Balance Sheet to show revenue from work completed, costs of work undertaken, equipment hire and supplies with a balance and forcast In an open and transparent way, all revenue and actual costs are compared with the quotation estimate to offer a project status. |
| Benefits | | 1. The client has the right to change the scope of the project at any time for any reason; and be given a fair and reasonable cost estimate as the consequence of each change. Changes may reduce or increase the cost of the project and the client must be informed of the consequences within 24 hours. | | 2. People working on the project have the right to be paid for the work they have underaken as activities approved by the client. People have the right to know where the client is not going to pay for work done. | | 3. Equipment hired for the project shall be paid for by the client or the equipment shall be off-hired to be collected by the contract hire company. | | 4. Supplies procured for the project shall be paid for by the client or the supplies returned to the supplier. | | 5. Where the cost estimates prove to be too low, the client has the right to pay the actual costs that keep the project viable or pay the estimated costs that will make the project not viable. | | 6. Where the cost estimates prove to be too high, the client has the right to pay the actual costs or pay the estimated costs and share the project termination balance. | | 7. The client remains demonstably in control of their own project by working in partnership with the contractor in an open and transparent relationship. |
| Diary | | 1. Daily Activity Briefing (DAB) as a task with 4 topics. | | 2. Register of people on site with time sheet and HAV by person. | | 3. Minutes of meeting as task with many topics. | | 4. Project task with excavation detail and optional uploaded evidence. | | 5. Delivery and Collection task. | | 6. Request for Information task. | | 7. Equipment inspection task with topics as LOLER, PUWER, etc.. | | 8. Document as task with many topics such as quotation, asset list, method statement, etc... | | 9. Contract hire of equipment as task with cost topic. | | 10. Purchased supply as task with cost topic. |
| Document Control: | | 1. Document Title: Construction Portfolio. | | 2. Reference: 161147. | | 3. Keywords: Construction Portfolio. | | 4. Description: Construction Portfolio. | | 5. Privacy: Public education service as a benefit to humanity. | | 6. Issued: 23 Jul 2018. | | 7. Edition: 1.2. |
|
|