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Provisional sum

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 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 contractors proposal or not. In some cases the work will be directly
allotted to specialized agency if so desired by the employer.

Are contractors entitled for variations in lump sum contracts?

Yes. Lump sum contract means the contractor has to execute the works for a specified
amount fixed in the contract. In a lump sum contract, the contractor is bound to execute
works for the completion of the project as detailed in the contract documents; in some cases
a bill of quantities will also be included. In either case if a specific work is not detailed in the
contract or if alterations are required, then it can be treated as a variation.
Examples of variation in lump sum contracts
2

An example of variation in lump sum contract is removal of a building or structure which is


not described anywhere in drawings or contract documents. Another example is alteration to
the details mentioned such as replacing painting works with tiling. A variation order is
required to be obtained from the owner/ Engineer before executing the works.
Sometimes a provisional sum will be incorporated in the contract for works which cannot be
detailed or enough information are not available at the time of tender. Please visit our pages
on provisional sums, contingency allowance, day works etc. for more information.
Variation provisions are detailed in Clause 51.1 of FIDIC Red Book1987 and Clause 13.1 of
1999 edition.

What is TOR Steel? What is the difference between TOR Steel


and TMT Steel?

TOR is a brand name - Toristeg Steel Corporation of Luxembourg. Their name (TOR) became
synonymous with Cold Twisted Deformed (CTD) steel bars due to popularity.
TOR and TMT are both high strength reinforcement steel bars wherein TOR refers to cold treated
bars and TMT refers to hot treated bars.
History : Round plain steel bars dominated the construction industry till seventies. Thereafter CTD
(or TOR Steel) dominated the industry till nineties. Nowadays TMT or hot treated bars are the most
popular due to its advantages over CTD (TOR) such as high strength and corrosion resistance.
Some of the popular grades of high Strength steel bars (either hot or cold rolled) are listed in the
following table.
American Standard
(ASTM A 615)

Indian
Euro Standard British Standard
Standard (IS:
(DIN 488)
BS 4449: 1997
1786)
3

Grade 75 (520)
Grade 80 (550)

BST 500 S
BST 500 M

GR 460 A
GR 460 B

Grade Fe - 500
Grade Fe - 550

What is Prime Cost Sum in Construction Contracts?

Prime cost generally is an allowance for articles to be provided by the contractor, of which price
cannot be fixed at the time of tender. It refers only to the supply of materials and not to the carrying
out of works. A specific amount will be earmarked in the BOQ for execution of such items.
Examples are fixtures and finishing works like ceramic tiles, sanitary fittings, water supply fittings
etc. that can be decided only at the time of execution. Contractor is not entitled for any profit on
prime cost items, but sometimes the cost of carriage will be provided if specified in contract. The
FIDIC Conditions of Contract do not mention about prime cost.
Definition of Prime cost by ICE (Institution of Civil Engineers, Great Britain)
"Prime Cost (PC) Item" means an item in the Contract which contains (either wholly or in part) a
sum referred to as Prime Cost (PC) which will be used for the execution of work or the supply of
goods materials or services for the Works.
How to claim Prime Cost Sum?
Contractor floats enquiries and get quotations; finalized quotation is forwarded to client for approval,
along with specifications of proposed materials. After getting approval, contractor proceeds with
procurement and installation. The price paid to the contractor will be the amount mentioned in the
purchase invoice.

What is Day Work in Construction Contracts?

Dictionary meaning of Day work is work done that is paid on a daily basis. In construction
contracts this term is applied under different contexts.
1. For variations in a lump sum contract, wherein work will be evaluated in accordance with the Day
Work Schedule included in the Contract. Day work rates for material, labor, plant and contractor
profits will be mentioned in the contract. In such cases the Contractor should consider supervision
charges in his bid that will not be paid separately. Clause 13.6 of FIDIC Red Book can be referred to
for claims wherein a day work schedule is included in the contract.
2. For variation purpose in an item rate contract; when item rates are not available within bill of
quantities for extra items to be executed, method of day works can be adopted as an option.
How is day work measured in a lump sum contract?
As mentioned in the previous paragraph rates will be included in the contract for material, labor,
plant and contractor profits. During execution of the works contractor should submit quotations for
Engineers approval. Works can be executed after getting approval in writing from the Engineer.
After completion of the works the contractor should submit to the Engineer along with IPC (interim
payment certificate) all the invoices, vouchers and receipts of goods, equipments and plant involved
in the work.

What is Clause 14 programme?

Project programme is also known as Clause 14 programme, in cases where the conditions of contract
are based on FIDIC.
Conditions regarding construction project programme are detailed in Clause 14 of FIDIC Red
Book1987 edition, whereas it is incorporated under Clause 8 of FIDIC Red Book 1999 edition.
FIDIC Red Book 1987 edition is still followed worldwide hence very often project programme is
known by the name Cl.14 programme.

What is Contingency Allowance in Construction Contracts?

Contingency allowance is provided in construction contracts to allow for miscellaneous unforeseen


costs which cannot be classified under any other head, but is necessary for successful completion of
the project. In construction contracts usually 3 to 5 percent of contract value is provided as
contingency allowance. An example of such unforeseen cost is price escalation. If there is a saving in
the contingency allowance, then this amount can be used for execution of extra items of work. That
means when variation claims are raised, it is common that the employer will cancel the contingency
allowance against variation claims, and pay the contractor.

PRIME COSTS AND PROVISIONAL


SUMS
Prime Cost (PC) items and provisional sums (PS) are two items in a standard building contract which
cause great confusion among homebuyers. Most building contracts are called fixed price contracts, but
the final contract sum can vary due to fluctuations in PC and PS items.

A PC item is an amount of money included in a contract sum to purchase a specified item such as tiles,
taps, doors or bathroom fittings. An agreed estimated amount is included at contract signing but the
specific products are not selected until a later stage. Under the Home Building Contracts Act (1991) a
builder must estimate the cost of such items at or above the lowest amount these items could reasonably
cost, which must not be understated.
For example if a client selects a more expensive door than allowed by the PC item, say a $500 door
compared with a $440 PC amount, a variation will be required to cover the additional $60. If the PC item
varies, so will the final contract sum.
A provisional sum is an amount of money included in the contract sum to cover work or materials, or both,
the extent of which cannot be specifically detailed when entering a contract. Typically, builders will
include a PS for sitework costs. The builder is legally required to take reasonable steps to ensure an
accurate site works cost estimate. However, in some circumstances, unforeseen events mean that the
provisional sum is exceeded, sometimes by a significant amount. This can be added to the contract sum.
For example, a building site may seem sandy and clean with minimal siteworks required. However, there
may be large limestone rocks or tree trunks concealed below the surface which only emerge once
siteworks commence, causing a considerable cost overrun.
Buyers need to plan for these contingencies. Careful upfront thinking about tile and door selection or
other PC items can ensure that an accurate PC amount is included in the contract. Moreover having a
buffer amount in your financial budget to cover any unexpected provisional sum overruns is desirable.

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