According to fidic 1987 cl 58, it is not clear to me how to track the payment to the contractor (unnamed contractor), especially if he receives services from other parties. Its costs agreed with the party include the mark-up of that part, so the contractor cannot receive a second time. Could you explain your point of view? In contrast, interim amounts include both the object of delivery and all related work to be performed by the contractor. As a general rule, the risk of exceeding the interim amount rests with the payer. Generally, changes that are part of the preliminary sum are administered independently and cannot initially be identified as part of the preliminary sum when they are processed. â the sum for work or services to be performed by a designated subcontractor, government or legal authority, or for materials or goods to be purchased from a designated supplier. This sum does not include the profit to be realized by the main contractor and/or presence and must be provided if necessary. It is neither unusual nor inappropriate to have one or two interim totals in a normal housing contract. Complex projects can include more. However, if your builder has included several preliminary amounts, be very careful. Ask them how they calculated the preliminary totals and what the likely “worst-case scenario” is. A provisional sum is usually included in the contract price as an estimate of the expected labour costs, which is as follows: For other contracts, the percentage can only be calculated on the basis of the difference between the provisional sum/cost premium in the contract and the final value of the provisional sum of the work or the main cost item. This approach assumes that the fixed component of the sum of the contract already allows (or should already allow) profit and presence in these elements.
In Midland Expressway Limited v. Cambba of 2006, the contractor argued that the terms of the contract did not take into account the need to omit the interim amounts or adjust them based on the value of the work actually performed. This argument was based on the fact that the value of the provisional amount was in their favour, i.e.: The amount covered the cost of the work performed and more, which led them to argue that the provisional amount should be paid in full. Typically, preliminary assessments are calculated like other variations. Essentially, it is the execution of the preliminary sum, a variation from the absence of work until the introduction of the works. However, in construction, it is not always possible or reasonable for customers and contractors to expect this from their supply chain, as many unknowns are unpredictable in these early stages of the pre-construction phase due to time and cost constraints that prevent proper investigation and design work so that the supply chain that will deliver the project can reach the price with a some degree of precision or certainty. Similarly, the contractor cannot rely on the value of the contract when awarding the contract if it contains interim amounts, since these may be omitted by the employer and awarded to others. As a result, the contract may not seem as valid as initially thought. From the employer`s point of view, it must take into account that in the case of the JCT, provisional amounts (defined or not) are part of the scope.
If the employer decides to omit the interim amount and outsource the work to another contractor, it can be challenged by the incumbent contractor for loss of profits. Defined provisional amounts are available when sufficient detail has been provided to the contractor to reflect them in its price and programme. This detail could include some level of design, an understanding of the construction phases, the likely quantity, and any known specific constraints. However, if all this is provided, it leads to the question: why specify a preliminary sum, instead of simply fixing the price of the item? The reason may be that, although there is enough information for the contractor to calculate prices, there may be a high degree of uncertainty. For example, the finished product cannot be selected, the conditions are too unknown, or the final quantity may differ. Lord Justice May gave a useful description of an interim sum in the Court of Appeal`s judgment in Midland Expressway Ltd v Carillion Construction Ltd (No.1) in 2006: the exact meaning and effect of an interim sum depends on what the parties agree in their contract. A generally accepted position is that, in the course of the work, the provisional amounts will be replaced by evaluations of the work actually carried out. In this way, final costs can theoretically go down or up. (The parties must specify that the interim amount will be replaced by the actual cost of the work, otherwise the contractor may claim that it is entitled to the interim amount plus the actual costs.) Indicative amounts are a useful tool for reconciliation and contractual certainty, but parties must have confidence in the adequacy of the sum in order to take full advantage of it as a management tool. Although attractive as lump sums, interim amounts are in fact risk elements whose size cannot be fully broken down for various reasons.
This could be due to a perceived lack of design at the moment, or if the level of uncertainty is too high for a contractor or subcontractor to commit to a price. The employer should be aware that the inclusion of undefined instalments means that it can be held responsible for all final costs and the impact of the program. There will be contractual provisions that could limit their risk in terms of unpayable costs. For example, with reference to the clauses of the ICE contract, which state that “the contractor will only be paid for the work performed to which the interim amount relates” and the possibility of conducting its own evaluation. However, it is advisable to work together to solve these problems in advance by arranging a quote for the work in advance. After going all the way to the Court of Appeal, the judge ruled that “interim amounts, by definition, must be paid in the contract only if and to the extent ordered by the employer.” It is always worthwhile to review the contract to ensure that the planned method for preliminary management of totals is stated and unambiguous. If there is a preliminary total in your deed of reference and work is underway on the position in question and it has not been specified in a design process, for example, when can you apply for these funds? A preliminary total is usually given as a round estimate.