Funders need someone looking after their financial interests who understands the construction process. This is where the experience, knowledge and skill of an independent monitoring surveyor (IMS) is crucial. An IMS, experienced in the peculiarities of the construction industry, will assess all risks to a development and provide specialist advice to the lender.
The role of the IMS starts well before any finance is released, initially with the due diligence process ensuring all planning conditions are met, noting any risks early in the process.
Then, approving drawdown amounts and, critically, confirming sufficient funds to complete the project. This diligence can continue well after payment of the last project invoice, as an IMS is an essential part of the lender’s team.
In depth professional knowledge enables an understanding of the full range of project risks, from statutory approvals to quality, health and safety, programme, and cost. Good communication is also key, not just to provide clear and comprehensive reports to the funder, but also to develop a constructive relationship with the borrower and consultants.
While the primary duty of an IMS is always to protect the finance provider, their role benefits the borrower too. All parties share the goal of successful project delivery — on time, on budget, and as specified. By identifying risks and protecting the interests of the lender, the IMS can assist the borrower to agree timely and appropriate mitigation.
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The application of expertise and skill by an IMS differs depending on how the developer is procuring the works. On a project with a full consultant team and independent contractor, the IMS will be reviewing information and reports provided by consultants, checking and analysing residual risks. However, the situation is vastly different and arguably more complex with a developer-builder, or a developer using a management contracting process where there isn’t the same level of visibility. Where a developer-builder is inexperienced, the IMS will need to press and educate — it’s a situation with which we’re very familiar. The IMS has to dig deeper into the technicalities of a project, seeking evidence of procedures and processes, rather than simply verifying presented reports. Three examples are:
- checking that a sub-contractor or professional fees have been paid from monies certified the previous month
- checking the status of planning and building regulation condition approvals
- reviewing invoices to verify spending has been correctly applied to the project pertinent to the build stage
This in-depth scrutiny provides the lender with reassurance that the funding is being spent properly, supporting project liquidity, to ensure there will be sufficient funds to complete the project successfully.
Making sure that sufficient funds to complete a project and reviewing the pressure on levels of contingency is constant for an IMS, regardless of how a project is being procured.
But, on developer-led schemes where a fixed contract price does not exist, these pressures can be much more intense. This is especially true in the current market where the combined effects of Covid 19 and the ongoing disruption of Brexit have contributed significantly to project risk. Strained supply chains, scarcity of materials and corresponding increased transport and import costs, combined with an ongoing skills shortage, all contribute to longer project duration and increased costs — and further pressures for a project.
In the current climate, an IMS working to identify, quantify and mitigate risks to protect project funding and, ultimately the project itself, is more valuable than ever.