LecA2-MC and SC MGMT

UEBQ4724
Professional Practice II
LECTURE A2
Main Contract and Sub-

contract Management
Prime Cost (PC) &
Provisional Sums
1
Prime Cost (PC) Sums & Provisional Sum
 Prime cost (p.c.) sums and provisional sums are lump sums
included in the contract sum to cover the cost of parts of the
work which are NOT:
 measured in the bills OR
 specified in detail in the specification
See example.
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(A) Prime Cost (PC) Sums
 A prime cost sum is a sum provided for work or services to be
executed by a nominated sub-contractor, a statutory authority or
a public undertaking or for materials or goods to be obtained
from a nominated supplier.
 The reasons for dealing with parts of the work by the use of
Prime Cost (PC) Sums are:-
i. In the case of nominated sub-contractor's work, to give
the architect control over the choice of firm to carry out
the work, particularly where it is of a specialist nature or
outside the scope of work normally carried out by general
contractors.
ii. in the case of nominated supplier's materials or goods, to
enable the architect to select articles or materials
manufactured by particular firms.
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(B) Provisional Sum
 A provisional sum is a sum provided for either 'defined' or
'undefined' work.
i. Defined work is work which is not completely designed at the time
the tender documents are issued but for which certain specified
information can be given.
ii. Undefined work is work for which such specific information cannot
be given.
 Provisional sums are used where the nature or extent of parts of
the work has not been or cannot be ascertained before the
construction begins, although such work can be reasonably
foreseen as necessary or likely to be necessary.
 They may also be used to cover certain liabilities, fees or charges
which the contractor may have to meet, for example, local
authority charges for rates for temporary buildings or for work
to be carried out by a local authority or public undertaking.
 Such costs are often not ascertainable precisely beforehand.
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(B) Provisional Sum
 Contingency Sum
 A special kind of provisional sum is one for contingencies,
known as a contingency sum.
 This is to meet or offset costs of work or expenses which
cannot be foreseen before construction begins and which
may not arise at all.
 A contingency sum has no real relation therefore to the
contract works at all and in practice merely serves to reduce
the total nett cost of any extra or more expensive work
than that originally envisaged.
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(C) Rights Of Nomination By Architect
The right to nominate is solely the architect's. He may exercise the
right:-
i. by nominate a sub-contractor or supplier in a prime cost sum
item in the bills of quantities or specification.
ii. by nominate a supplier in an architect's instruction relating to the
expenditure of a prime cost sum or a provisional sum.
iii. by nominate a sub-contractor on the Standard Form of
Nomination of a Sub-Contractor to carry out work which a
prime cost sum is included in the bills of quantities or
specification.
iv. by nominate a sub-contractor in an architect's instruction.
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(D) Sub-contracts And Contracts Of Sale
In order to safeguard the rights of the parties in a building project
and to make their respective obligations legally binding, a contractor
is required to enter into sub-contracts and contracts of sale with
nominated sub-contractors and nominated suppliers respectively.
So, in relation to sub-contract work, PAM Form clause 27 lists the
terms and conditions in relation to Nominated Sub-contractors as
follows:-
Clause 27.1
Expenditure of Provisional and Prime Cost (PC) Sums
Clause 27.2 (a) - (i)
Nomination of Nominated Sub-Contractor, Obligations of NSC
Clause 27.3
Objection to nomination of sub-contractor
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Clause 27.4
Action following objection of NSC
Clause 27.5
Payment by Contractor to NSC
Clause 27.6
Failure of Contractor to pay NSC.
Clause 27.7
Final payment to NSC
Clause 27.8
Determination of NSC's employment
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The provisions in clause 28.0 (Nominated Suppliers) are much
simpler. They specify various rights and obligations to be included
in a contract of sale, unless the architect and contractor agree
otherwise.
Clause 28.0 lists the terms and conditions in relation to Nominated
Suppliers as follows:-
Clause 28.1
Expenditure of Provisional and Prime Cost (PC) Sums
Clause 28.2, (a)-(e)
Nomination of NS, Obligations of NS
Clause 28.3
Objection to nomination of NS
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Clause 28.4
Action following objection of NS
Clause 28.5
Value of materials and goods supplied by NS
Clause 28.6
Payment by Contractor to NS
Clause 28.7
Contractor’s liability for NS
Clause 28.8
Employer no privity of Contract with NS
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It is important, therefore, that the surveyor when dealing with
prime cost sums is aware of the agreements which have been
entered into by the contractor and must adjust the contract sum
accordingly, within the scope and limitations of those agreements.
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(E) Profit And Attendance In Prime Cost (PC) Sums
General contractor’s profit
 Prime cost sums are deemed to be exclusive of the general
contractor's profit.
 Provision is made in bills of quantities and specifications for a
separate addition which is normally calculated as a percentage of
the PC sum, the tender stating the percentage that he requires.
 When the contract sum is adjusted by the omission of PC sums
and the substitution of actual costs incurred, the profit amounts
will also be adjusted pro rata, by applying the same percentages to
the actual costs as those inserted in the tender document against
the respective PC sums.
 Sometimes the profit additions may be shown as lump sums,
without any indication of the method of calculation.
 In those cases also, such sums should be adjusted pro rata to the
actual costs.
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(E) Profit And Attendance In Prime Cost (PC) Sum
General contractor’s profit
 In the event of the Employer paying a sub-contractor direct for
any reason, the general contractor is still entitled to the profit
addition, as this is a management fee for arranging, organizing and
taking responsibility for the sub-contract or for arranging and
checking the supply of goods and materials, as the case may be.
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General Attendances on nominated sub-contractors
 A general contractor has to 'attend upon' NSCs, as he is
responsible for their work and for the integration of the sub-
contract works into the main contract works.
 So, in his own interests, he needs to provide facilities to sub-
contractors so that their work may proceed unimpeded.
 Tenderers are directed in the tender documents to allow for all
such attendances in their tender sum.
 When there are bills of quantities, 'general attendances' on all
NSCs are given together in one item; individual items are given for
'special attendances' on each sub-contractor as required.
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Attendances on nominated sub-contractors
 The former (general attendances) are defined in the SMM, as
including:-
a) the use of contractor's temporary roads, pavings and paths
b) standing scaffolding
c) standing power-operated hoisting plant
d) the provision of temporary lighting and water supplies
e) clearing away rubbish
f) provision of space for the sub-contractor's own offices
g) provision of space for the sub-contractor's storage of plant
and materials
h) the use of messrooms, sanitary accommodation and welfare
facilities provided by the contractor for his own use
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 Special attendances include:-
a) such facilities as scaffolding, access roads and hardstanding

additional to that which would otherwise be required standing
scaffolding
b) unloading and positioning heavy and large items
c) storage accommodation and provision of power supplies
 The prices included in tenders for attendances are usually treated
as fixed sums which, unlike the profit additions, are not normally
adjustable pro rata to the actual of the sub-contract works.
 This is because the kind and amount of work or services involved
in the attendances remain the same, whether the actual costs are
higher or lower than the PC sum.
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 Only in the event of the sub-contract works being varied from
what was originally envisaged to the extent of affecting the nature
or the scope of the attendances, would the attendance amounts be
varied.
 Sometimes contractors show prices of attendance items as
percentage of the PC sums in the same way as the profit items.
 In such cases, the amounts should still be treated as lump sums
and the Qs would be wise to obtain the contractor's agreement to
this and to the deletion of the percentage rates, prior to the
signing of the contract.
21
Adjustment to Prime Cost Sum at the end of contract
Put simply, when the contract sum is adjusted at the end of the
contract, the PC sums are deducted and the corresponding actual
sums expended are substituted.
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1% LS
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(F) Adjustment of Provisional Sums
(i) PS carried out by General Contractor
 Provisional sums are usually intended to meet the cost of work
not determined or defined at the time of tendering, but which
normally will be carried out by the general contractor.
 In due course, the architect will issue, in accordance with clause
11.4 of the PAM Form, written instructions to the contractor
from time to time as to what work he is required to do, which
will be paid for out of the Provisional Sums.
 When the contract sum is adjusted at the end of the contract,
the Provisional sums, like PC sums, will be deducted and the
total value of work actually carried out will be substituted.
 In order to ascertain what that total cost is, the work will be
measured and valued as executed and will be priced in the same
way as varied work is priced.
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(i) PS carried out by General Contractor
 Such total cost may also include work valued as daywork.
 Alternatively, the contractor may be asked to submit a tender for

carrying out the work and, if his tender is accepted, the amount
tendered will be set against the appropriate Provisional sum in
the settlement of the accounts.
 As the work covered by Provisional sums will normally be
carried out by the general contractor and not by sub-contractor,
no items of profit or attendances are attached to such sums in
the bills of quantities.
 The valuation of the work carried out is inclusive of profit and
as sub-contractors are not normally involved, the question of
attendances does not arise.
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(ii) PS carried out by NSC
 However, the work for which a Provisional sum has been
provided may, if the architect so decides, be carried out not by
the general contractor but by a sub-contractor nominated by the
architect (see clause 27.1 of PAM Form).
 Then, the sub-contractor's account will be dealt with in the same
way as in the case of a PC sum.
 An item of profit will be added at the percentage rate used for
the profit items on PC sums for sub-contractors' work in the
bills and attendance items, as appropriate, will also be added.
 Thus, the total or the sub-contractor's account (as submitted or
as amended) plus profit and attendance amounts, will be set
against the Provisional sum in the final account.
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(iii) PS carried out by NS
 Again, the architect may wish to nominate a particular supplier
to supply materials or goods which are to form part of the work
for which a Provisional sum has been included in the contract
sum.
 In this case, the contractor will be entitled to a profit and
addition on the value of the NS's invoice at the percentage rate
of the profit items on comparable PC sums in the bills.
 The remainder of the work will be measured and valued in the
same way as varied work, including items for fixing the goods
supplied by the NS.
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Adjustment to Provisional Sums at the end of contract
1% LS
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Main Contract and Sub-

a) such facilities as scaffolding, access roads and hardstanding

 Alternatively, the contractor may be asked to submit a tender for

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