Friday, 25 November 2011

Provisional Sums in Construction Contracts


What is provisional sum in a contract?

Generally provisional sum is an amount allocated for a specialized work by a specialized firm, for which the details are not available at the time of tender. The provisional sum amount will be a best guess at the time of tender by the employer or contractor depending upon the type of provisional sum. Hence claim made by the contractor need not necessarily be the exact amount mentioned in the contract.

Definition of Provisional Sum by FIDIC Conditions of Contract

"Provisional Sum" means a sum (if any) which is specified in the Contract as a provisional sum, for the execution of any part of the Works or for the supply of Plant, Materials or services under Sub-Clauses  13.5(Provisional Sums).

Examples of provisional sums

Provisional sum need not be always allocated specifically for a single task. Sometimes part of contract itself may be made a provisional sum. There can be one or more than one provisional sum item in a contract. To elaborate, let us take the example of site clearance. There may be so many unpredictable items in site clearance. Consider an infrastructure project involving flyover, roads etc. wherein the regular items of clearance include asphalt road, paving blocks, kerb,signal poles, crash barriers, guard rails, sign boards, storm water drainage pipe lines, sewerage pipe lines, manholes, catch pits, gullies, trees, bushes, shrubs, buildings, fencing, compound walls, sculptures and monuments, concrete structures etc. In addition there will be items specific to the site as well. Many items will be measurable at the time of tender but some of the turn out to be uncertain. For example, quantum of work involved in removal of a site specific item like sculpture or monument may become difficult to ascertain. One way to overcome this difficulty is to allocate these as a separate provisional sum item in the BOQ.

What are the different types of provisional sums?

According to SMM7, Standard Method of Measurement seventh edition, provisional sums are divided into two categories; defined and undefined. In defined type, contractor is supposed to make due allowance in his quote for such item and it is to be incorporated in the project plan. In undefined type, contractor need not make allowance in the quote nor this item need to be incorporated in the project plan.
Detailed information of defined and undefined type of provisional sums are available here.

Is it binding for the contractor to execute the provisional sum items within time mentioned in project programme?

Though FIDIC describe in detail about valuation of provisional sums, it do not clearly mention the relationship with project programme. Generally provisional sums are not a universally accepted method since it is not advisable to include an item in the contract whose scope is not clearly defined.

How the claim is made for provisional sums?

The method of claim depends upon the arrangement made at the time of execution based on the detailed information. Usually the procedure is similar to a variation claim. For example the contractor floats enquiries and collects quotations. After evaluation, the finalized quotation is forwarded to client for approval with the details of agency proposed to do the work. The employer on his discretion may decide whether to proceed with the contractor’s proposal or not. In some cases the work will be directly allotted to specialized agency if so desired by the employer.  

2 comments:

  1. Is it binding for the contractor to execute the provisional sum items within time mentioned in project programme?

    I differ with the answer to this question. FIDIC specifies that for Provisional sum (Cub-clause 13.5) the valuation will be done in accordance with sub clause 13.3 variation procedure which clearly specifies for the time adjustment.

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  2. M/s. SANDIP NANAVATI is involved in the execution of various Civil Engineers Project since 1988. Today, we operate in the areas of heavy industrial and Infrastructure projects like construction of Road, Sub-Station Building, Control Room, Bridge, industrial sheds, office buildings for hydropower industries, petrochemical hydrocarbon industries, Private Sectors and Multi National Companies.

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