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Provisional sum
A provisional sum is an allowance, usually est imated by
the cost consultant, that is inserted into
tender documents for a specific element of the works that is not
yet defined in enough detail for
tenderers to price. This, together with a brief description,
allows tenderers to apply mark up and
attendance costs within their overall tender price and make
allowance for the work in the contract
programme.
An example of a situation where a provisional sum might be
appropriate is when work is required
below an existing structure, where the ground conditions
cannot be determined until the existing
structure is demolished and the ground opened up.
Provisional sums can be 'defined' or 'undefined':
Defined provisional sums are considered to have been accounted
for within the contractor's
price and programme. In effect the contractor is taking the risk
that their estimate will be
sufficient.
Undefined provisional sums are not accounted for in the
contractor's price and programme.
This means that the client is taking the risk for the works and
the contractor may be entitled
to an extension of time and additional payments.
Provisional sums are provided for in different ways
in different forms of contract, and some forms
of contract can be a little vague about how provisional sums
should be handled, in particular
regarding adjustments to the programme.
Provisional sums place either the contractor or the client at
risk of unexpected costs or delays.
Agreeing the cost of such work or extensions of time that
might be claimed can result in tension
between the contractor and client. For this reason, they should
only be used as a last resort,
they should not be an easy fall-back position for consultants
(who are not bearing any of the risk)
when designs are incomplete or information is difficult to
obtain. The risks are significant enough
that the NEC Engineering and Construction Contract (NEC3) does
not have any allowance for
provisional sums.
Provisional sums should not be confused with prime cost sums,
which are allowances for the
supply of work or materials to be provided by a contractor or
supplier nominated by the client.
Prime cost sums might include items that have already been
purchased by the client, such as
equipment, or a specific installation by a company with a strong
existing relationship with a client
organisation.
Find out more
Related articles on Designing Buildings Wiki
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Contract sum analysis.
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Last edited 13 Jan 2016
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