A Provisional Sum is a construction term where within a construction contract, a budget allocation is made (A Provisional Sum) for a specific part or parts of the work that is not fully defined at the time the contract is signed. It is essentially an estimate of the cost of particular items or works that cannot be detailed or accurately priced before construction begins. These items may include specialized works, materials, or conditions that are expected to arise but whose extent and cost are uncertain.
Key aspects and considerations of Provisional Sums include:
- Purpose: The inclusion of provisional sums allows for the allocation of funds for uncertain aspects of the project without needing comprehensive details at the outset. It provides flexibility to accommodate changes or additional works that are identified as necessary during the project's execution.
- Types: Provisional sums can be divided into two main types: defined (where the work is described but quantities and costs are not known) and undefined (where both the nature and costs of the work are not known).
- Management: The management of provisional sums requires careful oversight by the contractor, superintendent, and principal. As the project progresses and the details of the work covered by provisional sums become clearer, these items need to be priced accurately, and the contract adjusted accordingly.
- Adjustment of Contract Sum: When provisional sum work is carried out, the actual cost is calculated and compared against the provisional sum allocated in the contract. The contract sum is then adjusted based on the actual cost, which can result in either an increase or decrease in the overall contract value.
- Documentation and Approval: Before spending a provisional sum, the contractor usually needs to obtain approval from the superintendent or principal, depending on the contract's terms. The work must be documented, including the scope, cost, and justification for the expenditure, ensuring transparency and agreement on the adjustment of the provisional sum.
- Impact on Project: The use of provisional sums can affect the project's budget and timeline. Effective management and timely decision-making regarding provisional sum items are crucial to prevent delays and manage the project's financial health.
Incorporating provisional sums into construction contracts provides a mechanism for dealing with uncertainty and ensuring that funds are allocated for unforeseen aspects of the work. Proper management of provisional sums is essential to maintaining control over project costs and schedules, facilitating smooth project execution despite the inherent uncertainties of construction projects.
