Provisional sums in construction under FIDIC 1999
Provisional sums in construction are the best guest values provided by the consultants at the tender stage, For works cannot be determined at the earlier stage (As an example, excavating of uncertain soil conditions). So consultants are stating provisional sum amounts for these kinds of works (works which can not be evaluated).
Provisional sum- evaluating and payments
But at the end of the project, the client should pay the actual amount and contract price should adjust accordingly. Therefore provisional sum stating by the engineer should be reasonable. Sub-clause 13.5 in FIDIC 99 contracts is clearly indicating the procedures to be followed for paying the provisional sums.
After completing the particular works mentioned under provisional sums, the contractor should present all substantial documents proving cost incurred. As substantiate document, the contractor may submit all quotations, invoices and purchasing vouchers for material and plants purchased for works defined as provisional sums. Payment will be made for the actual amounts spent to complete the tasks plus the contractor’s overheads and profit as per the sub-clause 13.5 under FIDIC 99.
Most common items we may find as a provisional sum in a contract.
|Complicated excavation works where ground condition is unknown or excavation under water.
Image by Thomas B. from Pixabay
|Vertical movement systems such as lifts and escalators.
Image by Anja from Pixabay
|Construction of complected Pools, water features and internal/external landscaping
Image by Michelle Maria from Pixabay
|Complicated and unique structures such as automatic car parks, connection bridges.
Image by Bilderandi from Pixabay
Difference between prime cost sum and provisional sum items
Prime cost items are often similar to provisional sums. The only difference is before signing the contract exact cost of the prime cost item should finalise. As an example- Client has a nominated supplier for a specific item. But the client has not finalized the budget with the same supplier. So consultant may ask contractors to put their mark up and attendance fee on top of prime cost sum. But the contract sum will adjust before signing the contract according to the actual cost.
Prime cost sum only can use for a supply only items. But provisional sum can include supply and any other related cost of an item or element. And the provisional sum is an allowance.
Day works in construction under FIDIC 1999
For small or minor works at the site (such as cleaning, snagging and damage rectifying), The engineer can instruct a variation to carry out and complete the works based on daywork rates. Each variation issued under daywork rates will evaluate by the engineer at the later stage by using the day work schedule. Importance factor is that it is essential to include the daywork schedule in the contract document, to issue a variation instruction based on daywork rates, If not sub-clause 13.6 will not applicable according to the FIDIC contracts.
The contractor should submit relevant quotations of materials (except for goods specified in the schedule) before ordering the materials according to sub-clause 13.6 [FIDIC 99]. Also, the contractor should provide these quotations when applying for payments.
But for goods and personals stated in daywork schedule, the contractor should submit follows,
- name, profession and time of each person involved in particular work.
- Proper details, timesheets of the contractor’s plants, and temporary works used for particular work
- Material quantities (used for the specific task)
The contractor’s responsibility is that they should submit the above details to the engineer each day. And the engineer should check and approve the presented statement.
Adjustment for changes in legislation under FIDIC 1999
Time to time in every country, Legislations changes are happening based on government policies and requirements. New legislations are introduced by governments, and old legislations are revised or revoked.
Most of these changes are affecting the construction industry directly or indirectly. Therefore FIDIC 99 contract includes sub-clause 13.7 to supporting contractors and clients to make necessary adjustments due to these legislative changes.
As an example, most of the GCC countries have introduced value-added tax(VAT). (UAE and KSA have introduced the VAT from 1st of January 2018 and Baharain has introduced VAT on 1st of January 2019). This cause adding extra 5% into previously agreed contracts, and governments have advised clients and consultants to adjust contract price accordingly.