How to cover the funding gaps in construction projects ? What is a Financial plan ? Funding gaps ? Why Funding gaps occur ?

1. Financial planning for
Construction projects
Mohamed Abdalla
Hassan Hamed
MSc,MBA,PMP,PQP

2. I am more than glad
to be your speaker for
the next 45 minutes

3.  MOHAMED ABDALLA
 Projects Manager, Public Speaker
 MSC,MBA, PMP,PQP
 +971508143450
 pm@ace.ae

4. Introduction
Name:
Job Title & role
PM Knowledge
Interests

5. Introduction
• The construction industry is one of the most
important sectors in United Arab Emirates, 660
billion dirham, the value of construction
projects in the UAE in 2013, So it is essential to
know the ingredients for success of
construction projects in UAE. While
construction project is unique, projects differ
in objectives, size, budget, timeline and
complexity, but we may find some common
features such as changes and risks concerns.

6. .

7. Agenda
 What is a Financial plan ? Funding gaps ?
 Why Funding gaps occur ?
 How to cover the funding gaps in construction
projects ?
 What are the alternative solutions ?

8. Challenges in Construction
Challenges
Changes Financial
Funding gaps
Client
Consultant
Contractor

9. Gaps are good or bad

10. Gaps are good or bad
RISK ISSUE

11. • What is a ‘Financial plan'
A reliable financial plan is an indispensable
management tool for any company
• One of the most time and cost consuming
tasks in compiling a cash-flow plan is the
compilation of the cost-flow. This is achieved
by spreading the field costs of each project
over its duration.
Funding gaps

12. • What is a 'Funding Gap'
The amount of money needed to fund the
ongoing project activities that is not currently
provided by cash, equity or debt.
• Funding gaps can be covered !!!!
• Cash-flow forecasting is a dynamic process.
Funding gaps

13. When F.G occurred
Cash In
Cash our
20,000$
35,000$
Cash-flow forecasting is a dynamic process.

14. Who will cover the gaps ?
Gaps

15. Funding gaps
F.G

16. • One of the largest companies in the United Arab Emirates,
specialized in multi-investment, has submitted a tender for the
implementation of a project for which you have been assigned
to study the tender documents and decide whether the
company will submit a tender in the project or not. The
following information is available in the project activities and
cost
Example

17. Project

18. Funding gaps
• Make a funding plan throughout the project duration.
Determine the (MBR ) Minimum Budget Required to
funding the project . (How much is enough?)
• The most sensitive activities (Critical activities).
• Funding gaps .
• Financial Decisions to cover the funding gaps.

19. Project Schedule
3 7 7 10
8 4 12 12 3 15
12 21
8 12
15 9 24
11 4 15
0 3 3 8 24 33 33 37
0 3 3 6 5 11 24 9 33 37 4 37
8 11
11 3 14 14 10
14 10 24
3 9 9 14
3 6 9 9 5 14
K
D H
I
E
F
J
L
B
C
G
A

20. MBR (how much is enough?)
)

21. .Activity
A 100 100 100 A
B 100 100 100 100 B
C 100 100 100 100 100 C
D 100 100 100 100 100 100 D
G 100 100 100 G
E 100 100 100 100 E
F 100 100 100 F
H 100 100 100 100 100 H
J 100 100 100 100 100 100 100 100 100 J
I 100 100 100 100 100 100 100 100 100 100 I
K 100 100 100 100 100 100 100 100 100 K
L 100 100 100 100 L
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Early
Monthly
100
100
100
300
300
300
300
300
400
400
300
200
200
200
200
200
200
200
200
200
200
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Early
Accum.
100
200
300
600
900
1,200
1,500
1,800
2,200
2,600
2,900
3,100
3,300
3,500
3,700
3,900
4,100
4,300
4,500
4,700
4,900
5,000
5,100
5,200
5,300
5,400
5,500
5,600
5,700
5,800
5,900
6,000
6,100
6,200
6,300
6,400
6,500
Milestone
w3
w9
w14
w24
w33
w37
Time Schedule (Early Dates)

22. Lead & Lag

23. .Activity
A 100 100 100 A
B 100 100 100 100 B
C 100 100 100 100 100 C
D 100 100 100 100 100 100 D
G 100 100 100 G
E 100 100 100 100 E
F 100 100 100 F
H 100 100 100 100 100 H
J 100 100 100 100 100 100 100 100 100 J
I 100 100 100 100 100 100 100 100 100 100 I
K 100 100 100 100 100 100 100 100 100 K
L 100 100 100 100 L
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Late
Monthly
100
100
100
100
100
100
200
200
300
300
300
400
400
400
300
200
200
200
200
200
200
200
200
200
100
100
100
100
100
100
100
100
100
100
100
100
100
Late
Accum.
100
200
300
400
500
600
800
1,000
1,300
1,600
1,900
2,300
2,700
3,100
3,400
3,600
3,800
4,000
4,200
4,400
4,600
4,800
5,000
5,200
5,300
5,400
5,500
5,600
5,700
5,800
5,900
6,000
6,100
6,200
6,300
6,400
6,500
Milestone
w3
w9
w14
w24
w33
w37
Time Schedule (Late Dates)

24. Milestone Mile. 01 (w3) Mile. 02 (w9) Mile. 03 (w14) Mile. 04 (w24) Mile. 05 (w33) Mile. 06 (w37)
C accum. (ES) 300 2,200 3,500 5,200 6,100 6,500
C accum. (LS) 300 1,300 3,100 5,200 6,100 6,500
300 900
1,400
2,400
3,300
3,700
2,200
3,500
300
1,300
3,100
5,200
6,100
6,500
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
MBR Early Accum. Late Accum.
FG 02
FG 03
FG 01
FG 04
FG 05

25. Funding gaps throughout the entire
project life cycle
‫المشروع‬ ‫عمر‬ ‫خالل‬ ‫التمويليه‬ ‫الفجوات‬ 5
No Time Internal MBR L.SSC Fund Gap
1 0-3 300 300 0 Nil
2 4-9 900 1,300 (400) F.G .01
3 10-14 1,400 3,100 (1,700) F.G. 02
4 15-24 2,400 5,200 (2,800) F.G. 03
5 25-33 3,300 6,100 (2,800) F.G. 04
6 34-37 3,700 6,500 (2,800) F.G. 05

26. Decisions to Covering funding gaps
Decisions to Covering funding gaps
1. MBR from the commencement of
the project to cover any funding gaps
and invest the balance amount in the
bank with interest.
2. Advance Payment 20% + MBR
No
Time
Internal
MBR L.SSC Fund Gap
1 0-3 3,700 300 3,400 Nil
2 4-9 0 1,300 2,400 Nil
3 10-14 0 3,100 600 Nil
4 15-24 0 5,200 (1,500) F.G. 01
5 25-33 0 6,100 (2,400) F.G. 02
6 34-37 0 6,500 (2,800) F.G. 03
No
Time
Internal
Advance
payment2
0%
MBR L.SSC Fund Gap
1 0-3 1,300 300 300 1,300 Nil
2 4-9 900 1,300 900 Nil
3 10-14 1,400 3,100 (400) F.G. 01
4 15-24 2,400 5,200 (1,500) F.G. 02
5 25-33 3,300 6,100 (1,500) F.G. 03
6 34-37 3,700 6,500 (1,500) F.G. 04
3..Borrow from bank with interest 5%

27. Conclusion
Solutions to cover FG
1.
MBR
2.
Advance
payment 25%
+
MBR
3.
Using
Subcontractors
4.
Borrow from
bank with
interest 5%

28. Questions

29. Contacts
• For more details, please call at +971508143450 or
• send an email at pm@ace.ae

30. THANK YOU FOR ATTENDING THE
PRESENTATION
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