Expert: ALI IRVALI - 1/24/2012

Question
What is the explanation of fixed sum in the Bill of Quantities?

I have Contract conditions clause "Varaition exceeding 20%" as

"If, on certified completion of the whole of the works, it shall be found that a reduction or increase greater than twenty percent of the sum named in the Letter of Acceptance, excluding all fixed sums, provisional sums and allowance for dayworks"

I have found out provisonal sum and daywork details in FIDIC but could not get until now about Fixed sum. I will be thankful to you for your help.

Regards,

Imran Ansari
K.S.A

Answer
Dear Mr Imran,

I presume that you are working with FIDIC IV which original text revised directly or through your Particular Conditions of Contract. If we look the original text of FIDIC on  “Variations Exceeding 15 per cent”, as stipulated in Sub Clause 52.3, “ If, on the issue of the Taking-Over Certificate for the whole of the Works, it is found that as a result of:
(a) all varied work valued under Sub-Clauses 52.1 and 52.2, and
(b) all adjustments upon measurement of the estimated quantities set out in the Bill of Quantities, excluding Provisional Sums, dayworks and adjustments of price made under Clause 70, but not from any other cause, there have been additions to or deductions from the Contract Price which taken together are in excess of 15 per cent of the “Effective Contract Price” (which for the purposes of this Sub-Clause shall mean the Contract Price, excluding Provisional Sums and allowance for dayworks, if any) then and in such event (subject to any action already taken under any other Sub-Clause of this Clause), after due consultation by the Engineer with the Employer and the Contractor, there shall be added to or deducted from the Contract Price such further sum as may be agreed between the Contractor and the
Engineer or, failing agreement, determined by the Engineer having regard to the Contractor’s Site and general overhead costs of the Contract. The Engineer shall notify the Contractor of any determination made under this Sub-Clause, with a copy to the Employer. Such sum shall be based only on the amount by which such additions or deductions shall be in excess of 15 per cent of the Effective Contract Price.”

This clause protects Contractor to cover his general expenses and overheads, if percentage wise, difference of the total amount of the Works when the Project completed less than the amount indicated on the tender documents (in your case the difference is indicated as 20%. Similarly, it gives an option to the Employer to re-negotiate with the Contractor if it is more than the estimated amount at the tender stage. For this purpose, it describes “Effective Contract Price”, which is the total amount of the Works at the end of the Project excluding amount paid under Clause 70 such as Escalation, Reimbursements under Subsequent Legislation and Provisional Sums and dayworks (which may be performed through Engineer’s instruction).

In your case, “ Fixed Sum” also added to the Sub Clause. Fixed Sum is not a FIDIC term. “Fixed Sum” or sometime “Lump Sum” used to clarify a work item to be performed against payment of certain amount. When contractor execute and complete the said item, he receives the payment for such item indicated in the Contract. It is not a measurable item and also escalation (price adjustment) generally does not apply in case of “ Fixed Sum”.

Therefore, for comparison of total amount of contract when the Project completed with the estimated amount at the tender stage, you have to exclude Provisional Sums, Dayworks, Escalation and Fixed Sums. If there is no any fixed sum in your Contract, no worries, the text is general and you have to consider the rest.

I hope it is clear,

Best Regards

IRVALI