The Client and Its Challenge
The client, a private global investment firm, was involved in a joint-venture partnership on a more than $300 million high-rise, luxury condominium development project. The developer was contractually required to submit regular budget and cost-reporting documentation to the client and to obtain approval for ongoing development decisions.

During construction, the developer incurred significant cost overruns and neglected to provide adequate documentation of these additional costs to the client. In addition, our client was unable to obtain information relative to the current budget, costs incurred to date, and expected cost-to-complete for the project. This lack of information prevented the client from adequately monitoring its return-on-investment (ROI).

The Risk Consulting Solution
Marsh conducted an independent assessment of joint venture condominium project to prevent future “surprises” in regards to cost exposure. During this assessment, Marsh found it necessary to recreate and review the project cost history from project budgets and cost reports to accurately understand the existing financial status of the project. Marsh also conducted a comprehensive review of the contracts and joint-venture agreement.

To aid the developer in providing a consistent monthly report to the client, Marsh created a detailed reporting tool. This tool was a spreadsheet-based document organized to report existing budgetary information, costs incurred to date, the estimate-to-complete, the estimate-at-completion, and any project category or line-item variances.

Results
Based on the information provided as a result of the comprehensive contract review, the client obtained the necessary leverage to discuss the developer's lack of reporting and its impact on the client's financial objectives. The reporting tool, and documented process, enabled monthly updating of current costs and provided the client with an accurate comparison to the approved budget.

During the development of the reporting tool, Marsh identified additional areas of risk to the client. Risk areas, such as undefined scope, specific line-item cost overruns, inconsistent costs associated with general conditions and potential claims were identified and ranked. These issues, along with the monthly cost-reporting tool, allowed the client to negotiate an agreement amendment to minimize risks due to future cost overruns and surprises.