Provisional sum
| Provisional sum |
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| See also |
Provisional sum this is a specific sum included in the bid documents. It indicates to the bidder that it is contemplated that the particular work referred to will be carried out, but that, at present, no firm plans have been made as to cost, and usually the work has not been detailed either. The contractor is not entitled to profit or on-cost, unless the works go ahead. An example of this would be a general intention by the client to provide special ventilation to a laboratory, which is part of a larger scheme, but that no firm plans as to the full requirements have been drawn up at the time of inviting bidder.
Let us assume that $100000 has been included as a provisional sum. Later, a scheme is produced and priced up by the successful bidder, and his price is $95000, including profit and on-cost. Then at the end of the contract, when the final account is submitted, the contractor will show that of the $100000 provisional sum. $95000 has been spent, and the client will be $5000 better off than expected[1].
Types of provisional sum
Provisional sum are included in bills of quantities for items of work which cannot be fully described or measured in accordance with the rules of the method of measurement at the time of tender. For work measured under the rules of SMM7, three are types provisional sum[2]:
- Provisional sum for defined works- This provisional sum is used where works are known to be required in the project but have not been fully designed or specified at tender stage, and so cannot be measured in detail. The contractor must make due allowance for the planning engineering, project scheduling and pricing preliminaries: and to enable him to do so the following information must be provided with the provisional sum:
- the nature of the work
- how and where it is to be fixed
- quantities showing the scope and extent of the work
- limitations on method, sequence and timing
- Provisional sum for undefined works- Where the information required in support of a defined provisional sum is not available, the provisional sum is' undefined' and the contractor is not required to include any duration for the work in the tender works programme, nor to take account of the costs of planning engineering, project scheduling or preliminaries. Undefined provisional sum are typically used to make contingent provision for possible expenditure on elements of work which cannot be wholly foreseen at tender stage or cannot be quantified. A client's contingency sum is deemed to be an undefined provisional sum.
- Provisional sum for works by statutory authorities- SMM7 makes provision for a provisional sum to be included in a bill of quantities which is neither 'defined' nor 'undefined', for work to be carried out by the local authority or statutory undertakings, including privatized services authorities carrying out statutory works.
- Incorporating provisional sums in an estimate- Although not strictly required by SMM7, it is common for items to be measured to enable the contractor to price attendance and profit on works by statutory authorities as though they were nominated sub-contractors. It should be noted that these provisional sums are net and do not include a contractor's discount.
Programming of provisional sums
The question of whether the contractor is obliged to include in his programme for work in a provisional sum has not been satisfactory resolved. Nor has the follow-on question- is the contractor entitled to an extension of time for carrying out work in a provisional sum?
It is sometimes argued that the contractor should not be expects to programme work which may never be carried out and the ordering of any work under a provisional sum should be regarded as extra. It is suggested that this argument is flawed. The work in a provisional sum is part of the contract work and it is not a variation when it is ordered albeit that it may be valued as one. Moreover, there are no provisions in clause 44 for extending time for the work in provisional sums. Probably the best the contractor can do is to argue that an instruction under clause 13. Then to the extent that the timing of the instruction or its contents delays or disrupts his arrangements he is entitled to recover any extra cost which could not have been foreseen at the time of tender. He is also entitled to an extension of time.
The contractor is, of course, on stronger ground if the value of work exceeds the provisional sum. It can then be argued that the provisional sum is the limit of what the contractor has undertaken to perform and any excess must be in the nature of a variation[3].
Footnotes
References
- Eggleston B., (2008). The ICE Conditions of Contract , John Wiley & Sons, Oxford.
- Code of Estimating Practice , (2009), John Wiley & Sons, Chichester.
- Mobley R.P., (2010). Plant Engineer's Handbook , Elsevier, Wildwood.
Author: Dominika Grzyb
