Home Contract Practice Provisional Sum Meaning and Example in Construction Industry

Provisional Sum Meaning and Example in Construction Industry

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Provisional Sum

Provisional Sum – Meaning

What is the meaning of provisional sum? Simply, it is a money provision in the construction. In a project, there may be some items that are not finalized and detailed at the time of tender. In this type of situation, cost consultants may allow some money provisions into the tender (Bid) to cover the costs of such items.

Defined and Undefined Provisional Sum

Furthermore, a provisional sum is a sum provided for either defined or undertaken work.

  1. Defined Provisional Sum: It is defined when work is not completely designed at the time of tender documents that are issued but for which certain specified information can be given.
  2. Undefined Provisional Sum: On the other hand, undefined related to work for which such information cannot be given.

If it is fully detailed and decided to execute such items in the project, then that allowed money provision can use to complete the item. Since this money provision is a tentative allocation, the understanding of the provision sum is to pay the actual cost, and this actual cost may be higher or lower than the allowed money provision. In such cases, the contractor is required to provide all the relevant cost details with supportive and justify this actual cost.

Definition

The Term Provisional sum is defined as a sum provided for the works which cannot be entirely foreseen, defined or detailed at the time of the tender document are issued.

Provisional Sums Term in FIDIC

According to FIDIC Red book – 2nd edition 2017 under Sub- Clause 13.4, Provisional Sums mean,

A sum (if any) which is specified in the Contract by the Employer as a provisional sum, for the execution of any part of the Works or for the supply of Plant, Materials or services.

Advantages of Provisional Sums

Allowing of provisional sums are helping to protect the client from unexpected cost overruns because if the item is detailed and decided to execute, there is some allocated money to cover the cost of such works.

Secondly, by allowing the Provisional sums at the tendering stage, it will indicate the bidders; there are some items that are to be detailed and executed within the project. And also, it will provide an indication of the expected size of the intended works. Now since it has been a part of the original tender document and contract, it will prevent contractor claiming a variation or extra works for such items.

If a Provisional Sum is not allowed in the Tender or Contract for expected works, then it will be treated as a Variation to the Contract is such item is to be executed within the Contract.

By allowing Provisional Sums, it can exclude extra overhead costs to the client because if theses to be tendered separately, all tendering selection costs will be added costs to the client.

Another advantage of allowing Provisional Sums on uncertain items is we can exclude those items from the contract without a claim from the
contractor.

Provisional Sum Example

Provisional sum items shall be added in the separate bill called Provisional sums or Prime cost and Provisional sums in the Bills of Quantities.

  1. Construction of the below-ground drainage system. (When there are no tender drawings)
  2. Landscaping works
  3. Road marking for car park

Quantity column and rate columns are usually not filled in this bill section. In the unit column, “Pro Sum” or “Item” can be used as a unit. In the amount column, the consultant will add a rounded provisional amount based on the experience or previous records of projects.

 

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