Understanding Provisional Sums, Prime Cost Items, and Time Extensions in Construction Contracts
4005 Questions
Question 3: Provisional Sum Definition
A provisional sum is a monetary allowance that the tenderer is directed to include in their tender to provide for the cost of work, usually labor and materials, such as special fitments or air conditioning.
The contract price includes the items of work set out in the provisional sums schedule for which the contractor cannot give a definite price. The provisional sums schedule sets out the amount allowed for the cost of each item of work, including GST.
Question 4: Prime Cost Item Definition
A prime cost item is a monetary allowance for the net trade price of articles (supply only) of a tentative nature at the time of tender. Articles may be completely stated (brand, type, quality, etc.) or left for selection by the owner or architect.
The contract price includes the items specified in the prime cost items schedule, which the owner has not selected at the date of this contract and for which the contractor cannot give a definite price. The amounts allowed are for the cost of each item, including GST.
The installation of prime cost items and connection to services, unless otherwise specified, is included in the contract price.
Question 5: How Prime Cost Items Affect the Contract Value
Prime cost items affect the contract value because the contract price includes the items specified in the prime cost items schedule, which the owner has not selected at the date of this contract and for which the contractor cannot give a definite price. The amounts allowed are for the cost of each item, including GST.
The installation of prime cost items and connection to services, unless otherwise specified, is included in the contract price.
If the contractor purchases a prime cost item, any discount for prompt payment will be allowed in favor of the contractor. All written warranties for such items must be given to the owner on completion of the work and must be enforceable by the owner.
Question 6: How an Extension of Time Affects the Cost
Once an extension of time has been granted, the evaluation of the additional prolongation costs is often related to the period between the contract completion date and the extended completion date. This involves a comparison between the actual costs incurred and what the cost would have been had no delay occurred.
The contractor must complete the work within the Completion Period, which runs from the date of this contract or, if any approval for the work is to be obtained, from the date of written notification of that approval, whichever is later. The contractor will be entitled to a reasonable extension of time in the event of delays to the work where the cause of the delay is beyond the contractor’s control, including, but not limited to, inclement weather, industrial disputes, or variations to the work. The contractor must take all reasonable steps to minimize any delay to the work. Any claim for an extension of time must be notified in writing to the owner within 10 business days.
Question 6 (Continued)
If the owner gives the contractor written notice disputing the extension of time claimed, and no agreement can be reached on the time to be allowed, the dispute must be dealt with in accordance with the dispute resolution procedure.