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Provisional sums package

2 replies [Last post]
Wed, 2006-09-06 08:53
Francis Moyalan, ...
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Hi,

This thread is something related to the commercial side of the project management...My query is hovering around the concept of provisional sum package(PSUM package) in a project and lumpsum contract...

1.Suppose a project is valued around 1bn Dhirams and out of that mep package worth 180 mn is a PSUM package, external cladding worth around 200 mn is a PSUM pakage, landscaping package is a PSUM pakage worth around 80mn so cumulatively almost 460 mn Dms goes as PSUM pakage and only half of the project value that is 540 mn Dms rests with the main contarctor, so what is the advantage for the main contractor taking the project where almost 50% of the contract value is syphoned out by the nominated sub contractors?????

2.If the contarct is awarded on lumpsum basis, then if design changes come in between the execution , can these variations be claimed ???

Kindly anybody ponder your valuable insights on these issues......

Thanks,

Francis
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Replies

Thu, 2006-09-07 04:06
#1
John Lawson
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Hi,

Regarding projects with a large nominated sub contract content, these can often be turned to a contractors advantageit all depends in what has been agreed and priced in the contract.

If items such as provision of support trades are not included in the price, then the hiring of scaffold / scaffolders, cranages, accomodation, transport, labour to assist etc etc, which can be very beneficial to the contractor. In addition if the Nominated part of the work is a disaster, i.e. massive increase in scope, faulting nominated contractors then possible claims can result. Its all in the words!!

A fixed price is usually for an identifed specification and identified set of drawings. Any changes should normally be part of a contract variation. There again it all depends on what is written into the contract.

regards

John
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Wed, 2006-09-06 21:21
#2
Clive Randall
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Francis
Interesting point
The advantage to the contractor is that he will normally be able to allow a percentage on the provisional sums for managing the nom subs. If he isn’t he should place these fees/costs in his prelims and profit allowances.
As to variations, no reason at all on a fixed price contract why design changes are not claimable assuming they have not been issued and priced during the tender period and occur during the contract.
Fixed price contracts do not eliminate the ability to claim for changes, however you will need to carefully read how and what can be claimed for often prelims are excluded from extensions of time.
The essence is that the contractor has to assume responsibility for quantities, drawings and specs and all that is shown on the tender documents is included in his tender price. Ie even if it has not been measured but is shown on drawings or specs the contractor is deemed to have allowed for it in his tender. Simply put no remeasure of the quants.
Trust my ponder helps.
Clive
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