Is a provisional sum draw down time barred?

NEC3 and NEC4 Contracts Compensation Events
1

Although not required under the NEC contract, sometimes provisional sums are allowed for specific items of work in the contract. Where this is the case, is the contractor time barred in terms drawing down on the provisional sum as a CE

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This is very hard to answer because this is not an NEC mechanism under the contract. As you say Employers choose to add them sometimes but what do they actually mean and how should you deal with them? It is not even a given that they are a CE in the first place – they told you to allow £X for an element of works but how/when should that be paid? Which option are you working under, as the principle will vary between option A or C? I can’t see how you would be time-barred in any eventuality as if you are assessing it as a CE then this would not be one that the Contractor is obliged to notify anyway.

Provisional sums should not be used full stop. The biggest issue is actually not so much what cost do you allow in your tender price but what an earth are you meant to have allowed within your programme? Is the provisional sum meant to be to allow the installation of 1 large widget or 100 small widgets? There are better ways of dealing with these under NEC contracts, the main options being:

  1. Employer allows the “provisional sum” element within their own budget but it does not appear in the Contractors tender price. Any such requirement for this element will then be treated as a compensation event and assessed accordingly in terms of time and cost when it occurs.
  2. State in the Works Information an assumption of what is required for this element of work. This allows the Contractor to give a firm tender price for that element. If it turns out to be slightly different then you can deal with that difference as a compensation event, but it means the original price and programme will be a lot closer to the final outcome/truth than with option 1 above
  3. State that this element of work you are making the Contractor risk and they should price it even though you don’t know for sure what you want. This is obviously likely to be the least favorable to the Employer as the Contractor is likely to increase the cost significantly for a risk that may not materialize.

Any of these options are preferable to adding in a mechanism that it is unclear what and how it should be assessed. I appreciate this does not help you as you clearly have them under your contract. I suggest you call a meeting with your opposite number and talk through the issues surrounding this matter and agree a way forward.

3

I totally endorse what Glenn says about provisional sums in the NEC, they are bad news.

However, if they are there and they are being implemented via a compensation event (again I agree with Glenn that the process doesn’t really fit) then no I don’t think the time bar at 61.3 will bite. There is a very important caveat to the time bar, also in 61.3, which is that it applies UNLESS “the Project Manager” should have notified the event to the Contractor but did not do so". Given the nature of a provisional sum and when it can be expended (in a general non-NEC sense) it is hard to conceive of a situation where the Project Manager should not have notified, or even that he did not in fact notify. So, whether you characterise the compensation event as 60.1(1) a change to work information to do some work not in the original scope or 60.1(4) an instruction to stop or not start some work, in either case the onus is on the Project Manager to notify and therefore the time bar does not operate.

However, this is a fix to a problem that should not arise and should only be seen as a fix. Avoid the problem whenever possible.