#Prime Cost (PC) #Provisional Sum (PS) #Schedule Rates in Construction Contracts:
In construction projects, managing costs accurately is crucial. Today, we’re breaking down Prime Cost (PC), Provisional Sum (PS), and Schedule Rates, focusing on their applications in global contract forms like FIDIC, NEC, JCT, and AIA.
1. Prime Cost (PC):
◾ Scenario: A PC sum might be allocated for high-end finishes in a commercial office fit-out under FIDIC. The client hasn't finalized the brand or quality of finishes, so an estimated cost is included. Once selected, the contract sum is adjusted to reflect the actual expenditure.
◾ Residential Example: In a luxury apartment project under JCT, the PC sum could be used for bespoke kitchen units. The final cost is determined after the client selects the finishes, ensuring flexibility in design choices.
2. Provisional Sum (PS):
◾Scenario: In a major infrastructure project using NEC, a PS could be allocated for potential excavation work where ground conditions are uncertain. As the project progresses and conditions are confirmed, the PS is adjusted to cover actual costs.
◾Commercial Example: Under AIA, a PS might be included for unforeseen structural reinforcements in a high-rise building. The final amount is determined once site investigations clarify the scope of work needed.
3. Schedule Rates:
◾Scenario: In a hospital project under NEC, specific tasks like the installation of HVAC systems are priced using predetermined schedule rates. This approach ensures cost predictability and reduces disputes over payment for completed work.
◾Industrial Example: For an oil and gas facility under FIDIC, electrical installations might be priced according to a schedule of rates, allowing for consistent cost management across various work packages.
These terms provide flexibility and accuracy in project cost management, ensuring that projects adapt to changing conditions while maintaining financial control. Understanding their differences and applications across various contract forms like FIDIC, NEC, JCT, and AIA is key to successful project execution.
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Managing Director at PAPL Middle East LLC - FZ
6moHope VARUGHESE MATHEW, LLM, FRICS, FCIOB, FIIQS, FCIArb you are having a good panel discussion sharing your rich experience in the industry.