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PROVISIONAL ITEMS -ACTIVITIES TO INCLUDE IN BASELINE ??

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Kumar I
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ARE PROVISIONAL ITEMS,WHICH ARE QUANTIFIED AND PRICED IN THE BOQ TO BE INCLUDED IN THE BASELINE SCHEDULE SUBMITTAL.NOTE THE CLIENT MAY/OR MAYNOT INSTRUCT TO CARRY OUT THE PROVISIONAL ITEMS AT A LATER DATE.PENDING THE ABOVE,IN THE INITIAL SUBMISSION OF THE TARGET CONTRACT SCHEDULE ARE THESE PROVISIONAL ACTIVITIES TO BE INCLUDED OR NOT.

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Armando Moriles
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Peter, I just have a couple of follow up questions because I’m not good at contracts especially the NEC form of Contract as follows:

1. Under NEC form of contract, if a contractor fails to meet a Key Date because of problems associated with Provisional Sums not included in the programme, is the contractor liable for any delay damages?

2. “…This in turn reset progress % / manpower s curves etc.” Can you please specify the NEC sub-clause for this? Please specify also the NEC version.

Lastly, I thought you were only simply expecting a schedule suggestion regardless of the form of contract being used.

Please disregard also if my questions are irrelevant.

Regards,
Arman

Tom Farmer
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I guess I should be happy working in the US. Items are either in the contract or not in the contract, there is no "sort of". Lesson Learned: Do what is in the contract unless directed (preferrably in writing) to do otherwise by someone with Contract Authority. As a General Contractor working on fixed price government contracts, any time spent on non-contractual activities is coming off your bottom line until a contract modification is issued.
Peter Holroyd
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Tom,
good point. They are in the contract (sort of) just as any potential VI work is - once it has been negotiated and accepted by both parties and a VO issued. Trouble is this can be a long drawn out process (hence the time limits in some contracts), the contractor feels obliged to take on the work and usually he feels he has got a better price for the variation work.
Trouble is some quite small changes can have unforseen consequences for which you have just accepted responsibility!
Tom Farmer
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Peter, I have to claim I’m a victim of language usage. My comments were from the basis of understanding all items listed were included in the contract. I agree with you, non-contractual items do NOT go into the schedule.
Armando Moriles
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Hi Peter,

Just a suggestion...
500,000 for daywork labour:

Case 1 : Assume 70% of the budget to occur during the original contract duration & 30% during the defect liability period because client needs to reserve some budget to do some revisions after the original agreement have been satisfied.70% of daywork labour budget – I would forecast it to occur starting from 15% of project duration up to 85%. My percentages are just based on my experiences were changes orders or variations mostly occurred. However, I would only use very back loaded curve for this in order to be very conservative on the forecasted cash-in.

I’m so sorry I fall short of time today to make suggestions for the rests of the items. However, for the time being, I hope my suggestion make any sense to you.

Regards,
Arman
Peter Holroyd
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Tom,
the point I was trying to make was that as each of these items were Prov Sums (not PC Sums) - nobody including the Client expected to account for them in the contractors baseline schedule (or manpower curves etc).
They were only included in the contract as a mechanism to derive a contract sum for the client. Most of the items were derived from a formal risk management process.
As each of the events occured (or not) the Client issued a VO to include them in the contract and the contractor responded with a price/schedule change notice which was negotiated depending on circumstances at that time. Rather than reset the baseline an EoT was granted (if needed) for the new contract scope. This in turn reset progress % / manpower s curves etc.
This is the principle in the NEC Contracts - spend your time programming the real job as it stands today.

Tom Farmer
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You pose some very interesting situations. While I have not encountered these exact items, perhaps some of these ideas may help. First let me say the programme or plan must reflect all activities that have a cost or time impact. Also, I draw distinction be between allowances and contingencies. Contingencies should be associated with specific project scope items which cannot be fully defined and only be held for as long as the risk remains. An allowance means you know the requirement, but can’t fully quantify it. Here goes:

£500,000 for daywork labour - as a general labour pool (labour not coming from resources assigned other tasks)plan a linear progression from mobilization to demob. Carry 0% progress until such time as the client "draws" on it. IF resources are pulled from other contract activities, the impacted activities duration should increase. If the activities are on the critical path, then you’ll be able to demonstrate cost impacts to general conditions.

£7,500,000 for 3 months of industrial unrest - sounds like a job site shutdown event. If so, add as an activity before the demobiliztion milestone to preserve the planned completion date. Hopefully, the allowance value covers unrest during peak resource periods.

£2,000,000 for choice of washed seawater aggregate as opposed to land based sourcing - build the plan for the more expensive option. Presumably a modification will be issued (new activity) to account for the credit the client will likely be looking for. When will the owner make his choice? What info does the owner need to make the decision?

£250,000 for a new access road in case we can’t get owners permission to cross his land - definitely need to show this as if you had to build it and include in your baseline. Once you get owner approval, you can set the duration to zero. Presuably the client will want the credit, so when the modification is issued, add the activity and record 100% progress for the deduct activity and 100% progress for new access road activity. Progessing both in the same month will avoid cash flow issues.

£50,000 for moving unknown underground services - was the dollar value pulled from the air or was it associated with duration?

£350,000 for the increased risks in novating a large purchase order from Client to Contractor - need to understand the relationship of the "increased" risks to the duration of impacted activities. It may be similar to handling the case of washed seawaster aggregate.

£XXXXX contractors incentive bonus provision - sounds like this would be add to awarded contract, therefore, not shown until bonus actually earned.

£75,000 if Client adopts the latest tech standard - how does this relate activities in the plan i.e. what changes? Add the cost and assume worst case scenario for durations. With an allowance such as this, I would be inclined to ask, what new information are you expecting before making up your mind? If the answer is none, challenge the client to make a decision now. Scope indecision seldom has a positive impact on a projects success.

Just some ideas.
Peter Holroyd
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Guys,
I think this thread illustrates that business sectors use the terms PC Sums and Prov Sums differently.

In building with lots of nom subcontracts they tend to be in as Prov Sums and have to be included to get a sensible schedule (it says so in most building contracts!). This is because the Client is still haggling over the price with a supplier and not because he might or might not want it. It is just used as a mechanism to get to a contract price.

In process industry they would be PC Sums.

I would be interested to know how you can schedule prov sum items like (all real examples)
£500,000 for daywork labour
£7,500,000 for 3 months of industrial unrest
£2,000,000 for choice of washed seawater aggregate as opposed to land based sourcing.
£250,000 for a new access road in case we can’t get owners permission to cross his land
£50,000 for moving unknown underground services
£350,000 for the increased risks in novating a large purchase order from Client to Contractor
£XXXXX contractors incentive bonus provision
£75,000 if Client adopts the latest tech standard

I await your schedule suggestions !!




Armando Moriles
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Hi Rolyn,

I may take this as an opportunity to clarify where I am coming from as far as cost loading is concerned about Provisional Items within the Baseline(Target in P3). For me, Baseline is a Baseline, a record, not a document. It is something that should not be altered both values and activities contained in the programme. Such that no matter how the values of the Provisional Items varies (Working Programme), the Baseline value is always available to compare with. I only generate 2nd, or 3rd baseline should the need arises.

As an example, management sometimes may ask us planners to generate a Primavera report to answer how much is the target value of all or specific Provisional Item(s) for the next 3 months. Sometimes in the management point of view, it is important for them to have a good idea how would the Provisional Items affect the cash flow of the project as a whole. They need to study patterns so as the need to be prepared for such patterns.

Lastly, I would say that I find it very important for the Baseline to be completely loaded including Provisional Items with Cost. But then again, these all depends on how we do things best.

Regards,
Arman
Rolyn Jalea
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Hi to all,

In my view, provisional items should be included in the baseline programme. If it plays a major role in the schedule, it should be detailed, otherwise a single line activity will do.
Example, in our current project, lift installation & sensitive finishes is part of provisional items. We can’t neglect this activities because it plays a vital role in our programme, and in some point forms part of the critical path. Lift activities are required because it is where you can link the activity "removal of temporary lift" and "removal of tower crane" which I think is the most ideal. Sensitive finishes are the driving activities after structural works and you can’t ignore this one.
I agree with Armando on some points... except when it comes to cost loading. What I did, I loaded all the cost except those which are provisional items. Cost of provisional items may vary and it is not feasible to include it in baseline programme, or worst will not be awarded to you.

Regards,

Rolyn
Armando Moriles
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Hi all,

1.It is important that the Baseline Programme Total Budgeted Cost should be equal always to the Original Contract Amount including the Provisional Items.

2.Provisional Items could possibly be part of the Critical Path. For example, Base Course in a road construction project classified as a Provisional Item. It is important that it should be included in the Baseline Programme otherwise the critical path would be incorrect not indicating the critical base course activity. The programme then would mandate everybody concerned to resolve the issue as it is critical.

3.Baseline should not be affected as the provisional items changes as it is only the working or current programme that is being updated. Such that no matter how you would change the layouts from the original line items of the BOQ to per structure, responsibility, etc., the total cash flow, s-curve for presentation and reporting purposes, would remain to be the Original Contract Price vs. the Current Contract Amount (Interim) could be additive or deductive subject for reconciliation upon project completion.

4.In my personal opinion, I believe that it is not really for us planners to just simply decide not to include provisional Items in the Baseline Programme just because we will find it hard or impossible to maintain our baseline. Management might be confused if in the summary level we have a different contract amount. Also, we might be losing potential opportunities of claims should we fail to demonstrate the effect(s) of this Provisional Items in our Critical Path. It should be reflected, monitored, managed, progressed and reported at all times.


Regards,


Edgar Ariete
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Hi,

To be included in a Baseline Schedule? I think it’s not practical as you’ll never know when you’re going to get the details.. you can never fix your baseline.
Armando Moriles
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Hi all,

I would like to contribute my idea on this issue based on my experience as follows:

Some items during the time of CONTRACT NEGOTIATION remained to be incomplete as far as details of specific contractual requirements were concerned. Such that the contract was signed but many items were classified as provisional.But, it did not follow that although provisional those were not important for the completion of the contract. It has to be reflected in the programme. Some items were even part of the critical items or path. During the execution of the contract those items in the Psums that were reconciled already were extracted from the Psums and relocate it on its final item in the contract.

I think, it is a case to case basis and in my experience, The Provisional Sums had to be included in the programme.

Regards,

Arman
Pierre Azar
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hey guys,

I prefer not to add them in the baseline, because they may cause unnecessary delays at one point or another. Every time the CLient instructs you to proceed with a provisional sum item you add it and see how does it affect the progress.

Smile
Peter Holroyd
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John,
just check your Provisional Sums shouldn’t be PC Sums. (The building industry in particular tends to muddy this distinction especially with nomsubs)

How could you show Prov Sums on a schedule in sufficient detail that you could later use this in a claims argument?

Prov Items by their definition might or might not occur, so leave them off the programme. When/If they occur you will get a VI so triggering the cost/new schedule clauses.
John Lawson
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Hi

I always consider "Provisional Items" as being part of the contract, as such they must be included in the baseline schedule, project s’curves etc.(I usually add them as single activities - as little detail as possible).

Hopefully as the work progresses the "Provisional Items" can be re-addressed when more definative information is available from the client, the baseline schedule and s’curves can then be updated to reflect the current situation.

If client fails to get his act together, the delays to the "Provisional Items" can be reflected in the updates of the schedule and s’curves, this can hopefully lead to disruption, extension claims etc., at the very least they can help to "cloud" the issues.

Regards

John
Sunil Kumar
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It may or may not be included in the project but its imerative that PC sums be inculded in the schedule so as to put the client on notice and caution him periodically if they may affect the completion of the project. This also helps in claims on a later date...

Cheers

Sunil
Peter Holroyd
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Rules should be

include PC Sums as they have to be expended as they are needed to complete the job but the client hasn’t got his act together yet

exclude provisional sums which by their very nature are provisions of money against risks which might or might not occur and hence may not be reuired to complete the job - how can you show these on a schedule or include in resource graphs ?
Zhang Haixiang
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You can talk to client whether they want it or not.
Or submit your schedule with note as provisional items are not included or schedule for provisional items is just for refernece/information...
Dana Qandah
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I believe it is important to include provisional items in the base-line schedule. U may submit two baselines one with and other w/o. The client may consider that no additional time is required if the contractor did not notify him.
John Lawson
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Hi Peter

I always try to avoid a low level of detail for any “Provisional Items”, only showing basically when the work would be best planned to be executed in line with the defined scope.

It is then up to the Client to accept the dates / logic etc or ask to have it removed from the plan etc, (usually if askes to take it out means you will not be doing the work).

If the client cannot meet the dates and still requires the work to be carried out hopefully it will conflict with the defined scope and hence into a “grey area”, which can be discussed and priced.

Regards

John