What is a Provisional Sum?
Provisional Sum is a sum of money which may or may not be required to carry out work whose design is incomplete or whose total scope cannot be determined in the beginning. It is used to make an allowance for the said work in the contract. E.g. While excavating hard rock, the total quantity of hard rock cannot be determined beforehand. So a Provisional Sum will be allocated for the work.
How is it classified?
The NRM2 classifies Provisional Sum into to 2 categories viz, Defined and Undefined Provisional Sum.
Defined provisional sum means a sum provided for work which is not completely designed but for which the following information shall be provided:
– the nature and construction of the work;
– a statement of how and where the work is fixed to the building and what other work is to be fixed thereto;
– a quantity or quantities that indicate the scope and extent of the work; and
– any specific limitations and the like identified.
Undefined provisional sum means a sum provided for work that is not completely designed, but for which the information required for a defined provisional sum cannot be provided.
In Defined PS, the contractor takes the risk to adequately take into account the cost and time whereas in Undefined PS, the client takes the risk and the contractor will be allowed additional payments and extension of time if required.
How are they provided for in different forms of contract?
- The JCT follows RICS SMM7 with regards to the Provisonal Sum. It includes both defined and undefined PS.
- The FIDIC defines provisional sums and includes provisions for valuing them.
- The NEC on the other hand does not include Provisional Sums owing to the risks involved in the same.
Provisional Sums should only be used as a last resort as deciding the additional payments and time extensions can result in disputes between the client and the contractor.