In any case before even tapping into a PS, you need to talk to the client and ensure you have their express acceptance in writing to use the PS.
No one likes headaches.. Your email address will not be published. What is a provisional sum? When are provisional sums used? Provisional sums are often used in two situations: Where the precise details of a part of the works is not finalised.
For example when part of the site is hidden perhaps underground or within the fabric of a building and cannot be fully investigated prior to commencing the works. Where a project involves specialist sub-contractors. For example, a project that utilises new technology, which is impossible to price accurately in advance. Getting from a provisional sum to an actual price The precise meaning and effect of a provisional sum depends on what the parties agree in their contract.
You can read more about ECI contracts here. Prime costs are very similar to provisional sums, and often work in much the same way. A prime cost item is an allowance made for a specific supply item, where the final choice of the item has not been made at the time of entering the contract.
Traditionally, a prime cost is limited to the cost of supplying the relevant item, and does not include the cost of any work that relates to it such as its installation. In contrast, provisional sums include allowances for both the supply item and all related work to be performed by the contractor.
The result is that provisional sums and prime costs are treated exactly the same way under these contracts. The value of the adjustment for prime costs and provisional sums will depend on the terms of the contract. See, for example, clause 3 of AS and clause 11 of AS The treatment of overheads and profit on provisional sum works and prime cost items varies from contract to contract.
It will depend on how the provisional sum or prime cost was calculated in the first place. Prime Costs and Provisional Sums. Robert says:. June 6, at pm. Laki says:. December 2, at pm. Defined Provisional Sums are where the contractor has been provided sufficient detail to make allowance for them in their price and programme.
This detail could include a certain level of design, an understanding of construction phasing, likely quantity and any specific restrictions are known. However, if all of this is provided, it leads to the question: why include a provisional sum at all as opposed to simply pricing the item?
The reason may be that whilst there is enough information against which the contractor can price, there may be a high level of uncertainty. For example, the finished product may not be selected, the conditions are too unknown, or the final quantity may differ. However, by including defined Provisional Sums, there is a basis upon which to manage any change and the contractor has included time allowance within their overall programme.
As a result, the exposure to budget and time is minimised for the employer. An example of a defined Provisional Sum could be for making the contractor responsible in dealing with queries from a planning application.
There could be either fifty or eight hundred queries, but the contractor may wish to price what they consider reasonable or appropriate in a defined provisional sum. For the employer, the advantages of using defined Provisional Sums will be their ability to pass risk onto the contractor.
This is because the contractor will be deemed to have made sufficient allowance for the effect on programme and ensuing running costs. This will negate the need for the employer to establish impacts to the programme and agree any extensions of time later down the line in the event they decide to instruct the Provisional Sum.
For the contractor, a Provisional Sum is intent from the employer to undertake additional works. The opportunity is to work with the employer to develop the scope and price enabling the employer to instruct the works. Also, if they keep good contemporary records of the work undertaken, there is a good chance they will recover all of their direct costs for a defined Provisional Sum or their entire actual costs and time related costs for an undefined Provisional Sum. The disadvantage of Provisional Sums for the contractor is that they are taking on more risk, in terms of defined sums, where they are deemed to have already priced for the time to carry out the works in their programme.
If the allotted time proves to be insufficient, this could lead to some adversarial contract administration to recover their position. Similarly, the contractor cannot rely on the contract value at award if it includes Provisional Sums as these may be omitted by the employer and awarded to others. Therefore, the contract may not appear as rewarding as first thought. If the employer decides to omit the provisional sum and award works to another contractor, they may face a challenge for a loss of profit claim from the incumbent contractor.
The employer should be aware that inclusion of undefined Provisional Sums means they could be liable for the entirety of the final costs and programme effect. There will be contract provisions that could limit their exposure in terms of non-payable costs.
However, good practice is to work together to resolve such issues beforehand by agreeing a quotation for the work upfront.
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