he phrase ‘defined provisional sum’ in the JCT98 contracts may lead employers to believe that they have price certainty. In fact, they have nothing of the sort
As a novice to Building contracts I was baffled by the jargon used in them. For example, I had no idea what was meant by the term “provisional sum”. It soon became obvious that it was synonymous with “black hole”. The sum was no more than a figure inserted by the professional team. If the work covered by it was to be carried out, an instruction had to be issued; that instruction was then valued as a variation and extensions of time and loss and expense claims could then follow.
So what is the point of provisional sums? Presumably it is to forestall criticism about increases in the contract sum. Does the employer ever understand that the contract sum and the date for completion include these black holes? The answer in my experience is almost always no.
Still more mysterious jargon has since been included in the JCT standard form in relation to provisional sums. JCT98 includes a distinction between a “defined” provisional sum and an “undefined” one. Probably, only quantity surveyors expert in the standard method of measurement can explain the difference exactly, but the distinction seems to be that, for defined work, there is enough information in the contract to enable the contractor to price preliminary items, to allow for the work in its programme and to assess its impact on other work. But if that is the case, then surely it is also possible to price the work itself?
Take the example of a reception desk – an item commonly covered by a provisional sum. The argument is – I think – that the contractor can anticipate the preliminaries and programme issues arising from the supply and installation of a reception desk even though it does not know the precise details of the desk to be supplied. So a defined provisional sum is inserted.
But surely if the contractor does not know, for example, whether the reception desk is to made from some scarce granite with long delivery times or alternatively glass, which might be available immediately, it cannot accurately assess the preliminaries and programme implications of its supply and installation?
Accordingly, the mystery of the defined provisional sum unravels and the architect is back where it started – it must not only value the reception desk itself as a variation, it must also look at the effects it has on other work, adjust the preliminary items – and it may have to give an extension of time and, potentially, allow for loss and expense.
The distinction between a 'defined' provisional sum and parts of the works not defined in detail is meaningless
It must also be remembered that this concept of the defined provisional sum appears only in the JCT standard form 1998 edition. It does not appear in JCT With Contractor’s Design. Again, why is this? It is presumably because the employer’s requirements document, which is incorporated in this form when it is signed, is the limit of the design to be carried out by the employer’s professional team.
Any “gaps” in that design are to be filled by the contractor’s proposals, and either produced by the contractor before the contract is entered into or in detailed design information afterwards. In other words, if work is not properly defined in the employer’s requirements, it is for the contractor to define in whatever way it chooses. It can decide whether the reception desk is granite or glass, and if the employer objects and wants to secure a higher quality product, it must issue a change order anyway.
All of which means that the distinction between a defined provisional sum and parts of the works that the employer’s requirements simply does not define in detail is meaningless.
And what should the professional team tell their client about the distinction? They should confess that it is a distinction without real meaning unless and until the design for the reception desk is agreed. No employer should be led to believe that it is possible to buy any certainty if the contractor does not have enough design information to price the works.
Ann Minogue is a partner in solicitor Linklaters