Provisional Sums and EOT claims

Hi Ashraf



You may wish to read this



http://www.brewerconsulting.co.uk/cases/CJ0630RR.htm



Regards

Thanks very much Asraf

Hi Raphe,



I would try to answer your question.



What is the purpose of inclusion of provisional sum in a contract?

The purpose of Provisional sum in the Contract is to put forward the Risk factor which the Sponsor is willing to take. So the Total Contact Value including the provisional sum belongs to the Project Management Team (Client/Consultant) and not the Contractor. As far as the Contractor is concerned he is guaranteed the amount excluding the provisional sum. Any variation from his fixed scope will be covered by the provisional sum.





Are they (provisional sum) for specific activities of scope?

Yes there are specific activities to which portions of the provisional sum can be associated, this is the Risk analysis done by client as this is internal document of client it is not disclosed to the Contractor.





Could you plan for activities which details are not fully known to you at planning stage?

The Contractor can do his analysis of potential variation orders and attach it to provisional sum for profit calculation etc. This is however not shared with Client and remains with higher management of Contractor.





What happens when the activities the PSum is allocated to is beyond your original schedule?

If the Project Management Team (Client/Consultant) observes that the activities attached to the provisional sum it goes beyond the provisional sum then based on the merit and urgency they may opt for leaving the additional job in question for another project rather than over shooting the provisional sum or going to the sponsor for revision of project budget.





Hope this will make you clear.



Regards,



Ashraf

I would rather get you clear. What is the purpose of inclussion of provisional sum in a contrct? are they for specific activities of which scope? Could you plan for activities which details are not fully known to you at planning stage?



Than what happened when the activities the PSum allocated to is beyong your original schedule?



I think you will help me if you could give me answers to these questions



Regards

Guys,



Can the Contractor claim an EOT for a Provisional sum?



The answer shall be NO.



Provisional sum is introduced in the Contract as a result of honors risk analysis (generally 1-10%) of the total defined scope. The Provisional Sum may be used, in whole or in part, or not at all, on the instruction of the Company, by issuance of an Adjustment Order.



Provisional sum and EOT are not directly related. EOT may be part of such adjustment orders. The payment for this adjustment order is made from the amount that is in the provisional sum. So just because there is a Provisional sum in the Contract we cannot claim EOT.



Provisional sum is sort of limiting amount by the Sponsor to the Project management group. Till the total Adjustment orders are within the provisional sum it is comparatively easier to get through approval process, once the limit is crossed the Sponsor comes into the picture and to go any further the Project Management Team has to come with very valid justifications for further sanction of funds.







Best Regards,



Ashraf

Can the Contractor claim an EOT for a provisional sum?



I think not as the PS is part of the original scope of work (?) and the Contractor should have allowed for it in the Contract programme.



Anybody think differently?



Your question of weather a contractor can claim for an EOT for a provisional sum seems to be at large. I wouls approach from different angles. Firstly the provisional sum have to be defined, was the extent known at the time of preparing your programme ot tender which I doubt not (because that is why the amount is provisional. You could only planned for what is known to be done.



Secondly, is the provisional sum for specialist or subbies works? which you could not incorporate in your own programme due to lack of adequate information.



Should the above situation arose, I beleive an extension of time could be sustained.



Bravo

Hello Samagata and shahzad ,

your mails were informative

regards

deb

Hi Deb,

i came across this rather interesting subject. i do agree with Shahzad. Provisional Sum is not exactly a "Employer’s Risk" as it is in the scope of the Contractor and it’s his risk if not used. Also the fact that it is in the Contractor’s scope compels the Contractor to include it in his program.



However, the Contractor do have the right for EOT but only if their is any delay on part of the Employer w.r.t the agreed baseline program e.g delay in giving instruction (plz note that P.S can only be used with the Employer’s/ Engineer’ sinstruction), finalising the sub-contractor etc.By including the provisional sum in the project program the Contractor inturn makes the Employer equally liable for its execution.

I think that since provisional sum is defined amount in the Contract to be utilized in the defined contractual period therefore there are rare chances to get any Extension of Time in this respect.

I may not be as contractually aware as some members but I believe that the answer to this post will depend on the actual form of contract used (and any amendments made)



Under JCT forms there are two type of provisional sums,



Defined - for which it is possible to assess the work content. No change to the contract duration for the expenditure of defined provisional sums.



Undefined - Apllication can be made in these cases for extension of contract duration.

sorry forgot to mention Provisional Sum is actually EMPLOYERS RISK ,also it is an Uncertainty to the contractor so it should result in an EOT.

regards

deb

Hello Mr. Shachar,

"Provisional Sum " as defined in FIDIC in clause 1.1.4.10 and 13.5 ’99 , refers to an amount which will be utilized on the engineers instructions alone and the contract price will be adjusted acordingly if required , scope for the said works can be kept on the base line program on the instructions of the enginer and acceptance of the contractor alone , here i would like to mention that for my present project the engineer instructed during the premobilization period of our project to keep scope or defined periods for the Provisional sum items , which we being the contractors dint agree claiming that since the VOLUME OF WORKS is not defined and the said works are still not in our scope we would not be able to accept it in the contract period , after lot of negotiations it was agreed that a definite period of 10 days be kept for all the 6 provisional sum items that we have in our project (None of which are in the critical path ) and the activities should be read like e.g.

A1000 Audio/visual sys. wiring(P.Sum by others)

So my point is that there should be agreement at the outset on the provisional sums , because the items relating to the provisional sum will be given or not to the contractor is not certain.

regards

deb