khawaja uddin

Building Services / E&M Member since Feb 2006 5.3 years planning United Arab Emirates

Prov.sum Items

Hi,All How can we differentiate between "Provisional Sum" Item and "Prime Cost" Items. Thanks.

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31 Jan 2008, 15:30 #1

Gareth Evans
Building Works Member since May 2003 0.7 years planning Queensland

Hi khawaja These definitions may help you: PRIME COST ITEM (PC ITEM) An amount included in the contract documents to cover the purchase by the Contractor of specified items, such as specific bathroom fittings, etc. PROVISIONAL SUM - An amount of money included in the Contract Documents to cover works proposed as part of the Contract for which full information cannot be made available prior to calling tenders and letting of a Contract. cheers Gareth

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kier legard
Roads & Infrastructure Member since Jul 2006 6.6 years planning Philippines

RE: Prov.sum Items

Hi, Is Notice to proceed required for all types of provisional item, be it sum, quantity?

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Regards kier
09 Mar 2008, 17:44 #3

Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

Mike Testro RE: Prov.sum Items

Hi Kier Normally expenditure of a provisional sum requires an instruction from the C/A.

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Remeber that there are two types of provisional sum: 1. Defined - this needs to be included on the programme. 2. Undefined - This must be excluded from the programme and added in only when instructed to do so. If this instruction uses up float or causes delay then you may have grounds for an EOT. Best regards Mike Testro

15 Mar 2008, 19:20 #4

kier legard
Roads & Infrastructure Member since Jul 2006 6.6 years planning Philippines

RE: Prov.sum Items

Hi Mike, How about Provisional Quantity? Do I have to put a notice to proceed in my schedule for these items.

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Regards, kier
16 Mar 2008, 15:00 #5

Ronald Romero
Civil Engineering Member since Nov 2006 2.3 years planning United Arab Emirates

RE: Prov.sum Items

Kier, Just put it in the schedule since it is a tender schedule, the drawings and other documents is not yet ready so you have a lot of time to make a detailed planning for this provisionals items later on. Use this items to your advantage. Regards,

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16 Mar 2008, 15:24 #6

Mike Testro RE: Prov.sum Items

Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

Hi Kier Provisional quantities would not normally require an instruction to carry out - they would normally be subject to remeasurement. If there is a significant increase in

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quantity you may be entitled to more time to finnish the activity. Best regards Mike Testro

16 Mar 2008, 17:40 #7

Gayantha Abeywardena
Forensic Claims Analysis Member since Feb 2008 7.3 years planning United Arab Emirates

RE: Prov.sum Items

Hi Mike, I want to clarify ....The amount of increased quantity should be greater than 15% from the original qty please correct me if it is not so???? GA

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17 Mar 2008, 10:49 #8

Gayantha Abeywardena
Forensic Claims Analysis Member since Feb 2008 7.3 years planning United Arab Emirates

RE: Prov.sum Items

Hi Mike, I want to clarify ....The amount of increased quantity should be greater than 15% from the original qty please correct me if it is not so???? GA

39 Posts

17 Mar 2008, 10:50 #9

Gayantha Abeywardena
Forensic Claims Analysis Member since Feb 2008 7.3 years planning United Arab Emirates

RE: Prov.sum Items

Hi Mike, I want to clarify ....The amount of increased quantity should be greater than 15% from the original qty for claim the extra time and cost please correct me if it is not so???? GA

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17 Mar 2008, 10:51 #10

Author kier legard

Roads & Infrastructure Member since Jul 2006

Message RE: Prov.sum Items

Hi to all,

6.6 years planning Philippines

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Thanks a lot. Now its clear to me.

Regards, kier
18 Mar 2008, 18:56 #11

Ken Sadler
Forensic Claims Analysis Member since Jul 2008 23.4 years planning Nottinghamshire

RE: Prov.sum Items

I was looking back through old threads and came across this one relating to PC and Prov Sums. I know it was while ago but as there seemed to be some confusion, I thought I would try to make this one a bit clearer..... PC Sums stands for Prime Cost Sums. This would appear in a BQ of Schedule where an element of the item is undecided at the time of tender. For example, carpet may be required to certain rooms and quantified accordingly. If the exact type has not been decided, it may be that the QS includes for a carpet at a PC rate of 20.00/m2. The all-in price from the contractor might therefore be 35.00. In this, he would inlcude for spending 20 on the carpet, then add on for underlay, grippers, overheads and profit and labour. Now, in the event, the employer chooses the carpet and the cost to the Contractor is 22.00 per m2 (up 10%). The other costs are the same. It is a relatively simple calculation to omit the original 20 and add the 22. There will also be required some additonal profit on the 2 increase so the final, revised rate might then be 35 + 2 + 0.20 = 37.20. The idea is that the elements that are known and agreed remain fixed and unamended. It gives certainly to the Employer and reduces the opportunity for dispute. But, to complicate matters slightly, the term Prime Cost literally means "First cost". Cost is not always cost! It has been the custom since time began for suppliers to give the contractor a trade discount to encourage prompt payment. The question arises as to how much of that is for the contractor to keep and how much should be passed onto the Employer. A typical trade discount is anything from 10% to 75%. If the supplier told the Employer that the carpet was 22 but then told the contractor it was 10 then he would make extra profit. So what? you might say - business is business! But the extra profit is then way in excess of the level of profit included in the tender. As most forms of contract state that the value of variations shall be at BQ rates, then clearly the valuation will be wrong. So, there is a cap on the discount to be retained by the Contractor. The accepted amount of Main Contractors Discount (MCD) is 2.5%. Many Employers

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dont like the idea of contractors getting even this. They think that the 10% OH&P is sufficient - why should they get another 2.5%. Well, contractors are not banks and they end up buying the carpet and paying for it before the Employer pays them, and its a convention that nobody will alter. The 2.5% MCD is not a gift to the Contractor - its there to ensure he pays the supplier on time. If he doesnt, he loses it. So, the revised rate will be 22 for the new carpet which is the "First Cost" / Prime Cost, The nett cost is 2.5% less (21.45) then add the 10% and the remaining elements.

Provisional Sums are different. The sum is a lump sum dtermined by the Employers QS to cover an amoount of work which is not decided or quantified. For example, 20,000 for landscaping. The sum includes overheads and profit, so the contractor will expect to be spending approximately 18000 in cost. As Mike Testro pointed out below, there are two kinds - Defined and Undefined, which are of particular interest to Planners. Defined Prov Sums contain sufficient information for the contractor to know the extent of work required and allow for it in his programme. Undefined Prov Sums do not. Therefore Defined Sums shld be shown on the programme, Undefined ones should not. An instruction against an Undeined Prov Sum automatically gives rise to an Extension of Time, if required. However, beware that many tenders include lists of Defined Provisional Sums which clearly are not! i.e. they do not contain sufficient description for the extent of work to be determined, so they cannot be defined, despite their title! Provisonal Sum is not Defined just because it says so -it has to be sufficiently described, otherwise it is Undefined. You should exlcude anything you feel is not defined and raise this in the tender.
19 Jan 2009, 14:15 #12

Mike Testro
Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

RE: Prov.sum Items

Hi Ken Thanks for the input - it is useful to have a quantum experts view on things. I am interested in the concept that a Defined PS may be insufficiently defined so it becomes Undefined.

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Is there any case law on this subject? Another thing - is there a QS planet that would benefit from a planning viewpoint? Best regards Mike Testro
19 Jan 2009, 15:36 #13

Ken Sadler
Forensic Claims Analysis Member since Jul 2008 23.4 years planning Nottinghamshire

RE: Prov.sum Items

The authority is generally General Rule 10 from SMM7

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19 Jan 2009, 15:51 #14

Mike Testro
Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

RE: Prov.sum Items

Hi Ken Many thanks - Got it at 10.3 Havent read SMM7 for years - I started off with SMM5. Best regards Mike Testro

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19 Jan 2009, 16:17 #15

Trevor Rabey RE: Prov.sum Items

Heavy Engineering / Shipbuilding Member since Nov 2005 18.4 years planning Western Australia

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Ken, I wish I could see how this tangled ball of string is supposed to be simple or provide certainty for anyone. It looks about as complicated as someone could make it if that was their intention. Why not just start with $0 and when the client finally chooses the carpet, do it cost-plus?

20 Jan 2009, 21:00 #16

Ken Sadler
Forensic Claims Analysis Member since Jul

RE: Prov.sum Items

2008 23.4 years planning Nottinghamshire

Hi Trevor, It does seem complicated I know. However, the problem with leaving PC sums at zero or leaving them out altogether is that, when the items are subsequently introduced into the project, there is a danger that the increase in value / workload will have substantially altered the nature and scope of the contract and this might be used as a reason for setting the contract aside (in which the claimant will argue that the agreed prices no longer apply) or give rise to a claim for loss and expense. It is dangerous to the harmony of the agreement for one party to agree something with the other party, while knowing at the time the contract is formed that they intend to alter it.

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20 Jan 2009, 23:31 #17

Mike Testro
Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

RE: Prov.sum Items

Hi Trevor The thing that you may not know is that Ken is a money expert with an interest in planning. I have already picked up one useful bit of information from Ken that is directly related to planning. I am happy to listen and learn Best regards Mike Testro

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20 Jan 2009, 23:37 #18

Samer Zawaydeh
Civil Engineering Member since Aug 2008 20.3 years planning Jordan

RE: Prov.sum Items

Dear Trevor, We also use Provisional Sums to set aside money in the Contract budget for unspecified items. This is in case you have a major contact and you need to get approval of the overall cost of the project. Best, Samer

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21 Jan 2009,

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#19

Faried Khan
Forensic Claims Analysis Member since May 2007 10.4 years planning Pakistan

RE: Prov.sum Items

Hi All, I really enjoyed reading this thread, but I have a question regarding the Defined and Undefined PS, which is that, referring to FIDIC 4th, there is no such term, so what can we do with that!, on the top of that if the Defined PS items has been allowed, whilst as per the definition of the PS Items that might be extended or might be not (as per the definition of PS FIDIC 4th), so if I would allow the Defined ones in the baseline programme and then not extended by the Engineer, so in that case the baseline is false reference, so what can we do with that either? Thanks guys for your experts opinion

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12 Feb 2009, 00:23 #20

Author Mike Testro

Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

Message RE: Prov.sum Items

Hi Faried Definition of provisional sums between Defined and Undefined is peculiar to the British method of measurement SMM7. You will not find any such definition in a form of Contract - FIDIC or anywhere else. If there is a proper "Bill of Quantities" attached to your contract then it will have been measured in accordance with a set of defined rules. (Ken Sadler can tell you more about this aspect) You will need to check in the definitions of the Method of Measurement that prescribed your BOQ to find out. Generally if there are Provisional Sums in the contract price the rule to apply is: Is there enough information for a contractor to assess: 1. What work is required. 2. Is it sufficiently defined in detail 3. Can the work be set into the programme accurately For instance a provisional sum of say $10,000 for anticipated rock in excavations can be defined and programmed.

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Another for $10,000 for Daywork Contingency cannot be defined and programmed. Common sense applies. Best regards Mike Testro
12 Feb 2009, 03:24 #21

Faried Khan
Forensic Claims Analysis Member since May 2007 10.4 years planning Pakistan

RE: Prov.sum Items

Thanks Mike, I am so thankful for your comprehensive reply and expert view.

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12 Feb 2009, 08:57 #22

R. Catalan
Building Works Member since Aug 2005 14.5 years planning Saudi Arabia

RE: Prov.sum Items

All, PS can lead to uncertainty in scheduling especially when it is undefined.

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12 Feb 2009, 09:54 #23

Mike Testro
Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

RE: Prov.sum Items

Hi R I forgot to mention that it is good practice to state in your tender what provisional sums have been included in the programme and which have not. I think Ken mentioned this earlier in the thread. Best regards Mike Testro

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12 Feb 2009, 12:53 #24

R. Catalan
Building Works Member since Aug 2005 14.5 years planning

RE: Prov.sum Items

Mike,

Saudi Arabia

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Not easy attending to cost/time implications due to deletion/addition to PS. Keep PPing Mike, youve help a lot of PPers with your valuable inputs. Thanks, R. Catalan

12 Feb 2009, 15:59 #25

Mike Testro
Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

RE: Prov.sum Items

Hi R Actually it is very simple. If you have a PS activity in your programme and it is not reuired - or deleted then just change the task into a milestone. If you are adding a PS that was never in your programme then just add it as you would any other activity. If it is a delay event then treat it as such. Best regards Mike Testro

543 Posts

12 Feb 2009, 16:27 #26

Samer Zawaydeh
Civil Engineering Member since Aug 2008 20.3 years planning Jordan

RE: Prov.sum Items

Dear R. You need to include all the required scope including the PS in your Program. You need to use your teams expert judgement regarding the requirement of the PS, when it will start, how much resources and time. If you are running a Master Schedule, then the Milestone is the correct choice to use. Best Regards, Samer

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13 Feb 2009, 00:59 #27

R. Catalan
Building Works

RE: Prov.sum Items

Member since Aug 2005 14.5 years planning Saudi Arabia

Mike/Samer, Thanks for your inputs, but its not what I mean. Ive done programs with PS and Im okay with it. The trouble starts when due to reduced PS scope you have to force another Subcon to start too early as planned (e.g. 1 month earlier that the contract date). He/she cant do anything especially if the materials or equipment are coming from overseas suppliers. Putting another order and bringing them by air entails cost and time implications. R. Catalan

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14 Feb 2009, 09:16 #28

Ken Sadler
Forensic Claims Analysis Member since Jul 2008 23.4 years planning Nottinghamshire

RE: Prov.sum Items

Hi The fact that you have done programmes with Prov Sums in and that you are "ok with it" might be the root of your problem. We have elaborated on the characteristics of defined and undefined provisional sums in another thread and Mike has alluded to this in his post below. For the prov sum to have been included or allowed-for in your programme it must have been sufficiently described in the tender documents for it to be regarded as a defined provisional sum. Therefore, you must have been aware of its nature and scope and the period required to undertake it. So the work covered by the prov sum is now reduced? That presumably is because of a variation from the Employer changing (reducing) the work involved. The effect of the change is to create a float in your programme. You do NOT have to "force another subcontractor to start early and fill this float time". Your obligation is to complete the works by the date for completion. Notwithstanding that you have to mitigate delay and proceed regularly, there is no obligation to disrupt your planned sequence because the Employer made a change. If your subcontractor cannot bring forward the delivery of materials, or take advantage of an earlier access to site without incurring additional costs, then you have no obligation to accelerate or re-schedule the works. If the Employer is prepared to accept the disruption that such action will cause,

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and pay for the acceleration or disruption, then you might, by agreement reschedule. The trap you are about to fall into is to get the subcontractor to site earlier than planned, and because his material cannot be delivered earlier, he will progress his work more slowly and will be on site longer than his price allowed for, yet he might not finish any earlier. He will then claim prolongation and disruption from you. You will be the victim of your own enthusiasm and your ignorance of your rights under the main contract. Generally, the Employer is not entitled to shorten the contract period. Have a good read of your EOT clauses. You will see that the period can only be extended, not shortened. The only time the period can be shortened is AFTER an EOT has been granted and the Employer removes work. Even then, the period cannot be shorted beyond the original period for completion unless both parties agree, which, If I were in charge, would involve a substantial payment!! In summary, dont forget that the prov sum, if defined and therefore included in your baseline programme, should be carried out in reasonably the same fashion and time as your tender allowance. If the employer changes it, then ALL the consequences of that change form part of the variation. If the change seemingly reduces the workload, but at the same time causes a float or disruption / acceleration to other parts of the project, it is not your obligation to dive in and incur costs. Either the Employer pays for the disruption / acceleration, or you regard the variation as having no time-effect and you proceed as your original programme.

Hope this is clear

14 Feb 2009, 14:26 #29

Mike Testro
Forensic Claims Analysis Member since Dec 2005 32.3 years planning Suffolk

RE: Prov.sum Items

Hi All Ken is crystal clear in what your rights and oblogations are in respect of Provisional Sums. One small point is that the Engineer has to issue an instruction to expend the provisional sum and that instruction is to be treated like any other under the contract. This is not the same as provional quantities where re- measurement does not need an instruction. Best regards

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Mike Testro
14 Feb 2009, 14:47 #30

Author Ken Sadler

Forensic Claims Analysis Member since Jul 2008 23.4 years planning Nottinghamshire

Message RE: Prov.sum Items

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Its a habit I have of referring to the Employer. when I say this, I mean the Engineer / Architect or whoever else is the Employers agent, servant or representative. Its because Im from a building background rather than civils. Mikes right - Prov sums are entirely different to Prov quantities

Regards Ken
14 Feb 2009, 14:54 #31

R. Catalan
Building Works Member since Aug 2005 14.5 years planning Saudi Arabia

RE: Prov.sum Items

Ken & Mike, I wanted to express my appreciation for the valuable inputs. As Mike has said, its crystal clear. This is really whats is PP for. Thanks again, R. Catalan

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15 Feb 2009, 09:49 #32