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Provisional Sum

3 replies [Last post]
Mon, 2010-06-07 09:36
Lo Gary
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In my project, there are quite a lot of provisional sum. It is assumed that the main contractor should have allowed time for these provisional sum in the contract. However, in fact, the contractors know little about the exact scope of these works. Do the contractor entilte for claim if it comes out that these provisional sum are very complicated finally.


Gary
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Replies

Fri, 2010-06-25 10:51
#1
Andrew Tweeddale
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Hi Lo,

Mike is correct re: SMM7 and the issue will turn on whether it is a defined or undefined provisional sum.

Many international contracts, however, don’t draw the distinction between defined and undefined; e.g. FIDIC 99. The starting point is to see what the terms and conditions say about provisional sums. In an unamended FIDIC 99 form of contract there is a view is that the contractor bears the programming risk for provisional sums. The exception to this is where the Engineer instructs works where the value of those works exceeds the provisional sum. The FIDIC guide states: that Sub-Clause 13.5 refers to each Provisional Sum being used "in whole or in part". The Engineer has no authority to instruct sums in excess of the Provisional Sum. The FIDIC guide then states: "Under [the Red Book], if the amount stated in a Provisional Sum is exceeded, the Contractor must still comply with the Engineer’s instructions which he received under sub-paragraph (a) and/or (b), but he may not be bound by the financial consequences under this Sub-Clause in respect of the excess."

In summary, under an unamended FIDIC 99, unless the provisional sum is exceeded the Contractor is likely to bear the programming risk. (I say "likely" because the civil or common law may have a part to play - in Australia for example there is the Domestic Building Contracts Act 2000)

I have heard arguments (mainly from programmers) that a Contractor might get an EOT based on custom if the provisional sum is undefined. I am quite sceptical about that line of thinking.

Hope this helps

Andrew
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Mon, 2010-06-07 16:34
#2
Mike Testro
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Hi Lo

If your contract has a standard method of measurement (SMM) attached then there should be a definition of a Provisional Sum in two categories.

1. Defined provisional Sum - which has sufficient information attached to allow inclusion in the programme.
2. Undefined provisional sum - which does not have enough details to allow inclusion in the programme.

If you are using the UK SMM7 then clause 10.3 will give the definitions.

Have a look at your contract to see what pertains to your situation.

If nothing else will help there is always the call to natural justice sometimes known as the rule of Contra Proferentum.

Best regards

Mike Testro.

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Mon, 2010-06-07 12:57
#3
Samer Zawaydeh
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Dear Lo,

The Contractor will be entitled for Claim only if the scope and cost of the Provisional Sum changes.

Contractors are smart people. It can go either way during the course of the project. So if they play dump at a later stage for a sympathy extention of time, it if up to the Client to approve it or not.

With kind regards,

Samer
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