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Construction Law/provisional sums in lump sum contract

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QUESTION: Dear Peter,

Glade to ask you again and Iím sure and confident of your replying quality.

Please we have a lump sum project , form of contract is fidic red book 1999.

Iím part of employerís team members.

our employer has directly appointed a main contractor to execute a fitting-out work on existing hotel.
he made a contract agreement based on letter of Award.

below are some info before addressing my questions:

1) it was agreed that MEP work will be professional sum. and the amount for that provisional sum was declared by the employer.

2) the contractor handed over the priced BOQ to the employer and in the BOQ he has 11 Bill Nos.

3) the MEP work was Bill No 10 with same amount declared previously.

4) also there is an appendix for provisional sum placed separately in his commercial submission

5) and there is another appendix for PC-Rates also separately placed in his commercial submission

6)the whole " commercial submission" came through cover letter mentioning the quotation total sum.

the questions are:

1) In defining the contract price (for the project) the provisional sum will be included? as you know contract price will have many implications later on ... example the advanced payment percentage will be calculated from the project contract price ... the contractor mentioned the total sum for his quotation (including the PS for MEP).
this is ryt ? or we should deduct the provisional sum amount from the contract price?

2) in the PC-Rates appendix he did not include final prices for the listed items he mentioned unit-rate? is this ryt? we have lump-sum contract.

3) in his submission he mentioned the below 2 statements
A) "Variance in site dimensions will be charged on pro-rata basis accordance to our unit rate given"

do you think this statement sounds right? the rates given are only indicative for schedule of payments as it is a lump sum contract?

what do you think?

B)he made exclusions for " any other items not priced in the attached BOQ" ... now again is this right? BOQ in lump sum project is not used to define scope or to pay against included in (BOQ) items.

I mean anything in the whole contract mentioned in Particular conditions,drawings,specs and any other contract document and not mentioned in BOQ the contractor is still obliged to execute? right?

thanks and regards

ANSWER: Dear Dzaie,

1. Do you mean Contract Price, which is a variable amount, or Accepted Contract Sum, which is a fixed amount?  The latter does not include Provisional Sums for the calculation of various fixed items.

2. FIDIC 99 does not mention PC items, so it depends how PC sums are defined in the ITT.  Generally any omitted extensions are corrected during the tender evaluation and included in the tender total.  

3A. It depends on what is stated in the ITT.  Normally, the lump sum contract includes everything shown on the drawings or specified in the Specifications.  If the tender drawings or specifications are incorrect, then there would be a correction in the Contract Price.  

3B.  See the answer to 3A.

---------- FOLLOW-UP ----------

QUESTION: 1. Do you mean Contract Price, which is a variable amount, or Accepted Contract Sum, which is a fixed amount?  The latter does not include Provisional Sums for the calculation of various fixed items.

contractor submitted price in his quotation.

I would take this chance to ask you contract price and contract sum are not the same?

2. FIDIC 99 does not mention PC items, so it depends how PC sums are defined in the ITT.  Generally any omitted extensions are corrected during the tender evaluation and included in the tender total.  

unfortunately there was no tendering stage its directly appointed contractor and LOA only issued for that purpose and pc rates not mentioned  

3A. It depends on what is stated in the ITT.  Normally, the lump sum contract includes everything shown on the drawings or specified in the Specifications.  If the tender drawings or specifications are incorrect, then there would be a correction in the Contract Price.

there is no ITT as there is no tendering stage, the question is generic ... in lump sum contract site measurements against BOQ is allowed? the BOQ in lump sum project is for interim payments and evaluation for variation,correct me if I am wrong in line with generic concept.  

3B.  See the answer to 3A.

thanks and regards

Answer
Dear Dezaie,

1. Please refer to clause 1 Definitions for the definition of Accepted Contract Sum and Contract Price. They are not the same thing.
2. I hope that the PC sums are defined in the BoQ or SCC.
3. The use of the BoQ is defined differently in each Lump Sum project.  Hopefully, here the Lump Sum is defined as the cost of the work needed to fulfil the works shown on the tender drawings and the Specification.  If not, just give the Contractor a blank cheque and let him fill in the figures.  

I guess that the Employer and the Contractor have worked together before and trust one another.  You will have to act with care in administering the Contract.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

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Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

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