Guide letter 30: Advice to client - expenditure against provisional and prime cost sums

1. When and how?

1.1 Before the contract is signed you should have sought and received your client's agreement for the following:

• all provisional and prime cost sums included in the contract;
• the purpose of each provisional sum; and
• the procedure by which the provisional sums will be expended.

1.2 You should be sure that your client understands that provisional and prime cost sums requiring approval for expenditure include performance of particular work, supply or supply and installation of an item or payment of a fee or charge to an authority.

1.3 You should write this letter recommending your client's approval for expenditure of any provisional sum at a time which will allow the contractor to carry out the works without delay. You should therefore liaise with the contractor early in the contract to confirm the latest program dates for decisions regarding the expenditure of provisional and prime cost sums.

1.4 The Institute has developed a suite of standardised template forms to suit the various types of instructions incorporated in the ABIC suite of contracts. The forms include space for detailed explanations of the expenditure of provisional and prime cost sums and a distribution list, and may therefore be used in place of a letter to the various parties.

2. Content

Advise:

• nature of the work for which the expenditure is recommended;
• the provisional or prime cost sum against which the expenditure is to be made;
• method by which the value of the proposed expenditure was determined, eg tender, contractor's price, statutory fee etc;
• a summary of the expenditure to date under the provisional or prime cost sum, the value of the now proposed expenditure, the residual value of the provisional or prime cost sum following this expenditure and any effect that this expenditure may have on the contract value and time; and
• when approval is required to prevent any delay and/or increased costs

Recommend:

• approval for the expenditure in the circumstances where the value of the provisional or prime cost sum included in the contract is exceeded.

3. Action

3.1 It is prudent to gain your client's authorisation for all expenditure of provisional and prime cost sums. It is also strongly recommended that you seek your client’s authorisation in any circumstance where the provisional or prime cost sum may be exceeded.

4. What happens next?

4.1 Following your client's approval, you should issue the appropriate instructions and formal notices of any cost and/or time adjustment.

5. What can happen if you don't?

5.1 If you fail to obtain your client's consent to increase a provisional or prime cost sum, the project budget could be exceeded and you may be sued for overstepping your authority.

6. Copies

6.1 Architect's file

6.2 Relevant specialist consultants