【Haichuan EPC】Both “provisional amounts” and “provisional estimates” may seem similar, but the difference between them is huge
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In the pricing system for construction and installation projects, both \"provisional amounts\" and \"provisional estimates\" fall under the category of other project costs. Although both terms contain the word \"provisional\" and may seem similar, there are significant differences between them in terms of nature, purpose, and settlement rules. According to the \"Code for Quantity Calculation and Pricing of Construction Projects\" (GB50500-2024), there are clear boundaries between the two in terms of definition; the main differences lie in whether such item is \"inevitably incurred\" and the certainty of its price. Provisional amount: A provisional amount refers to a sum that is temporarily determined by the project owner and included in the contract price for the project. It covers the costs associated with the procurement of materials, construction equipment, and services that are not determined at the time of signing the construction contract or that are unforeseeable; project changes that may occur during construction; adjustments to the project cost when factors specified in the contract require such adjustments; as well as claims and on-site approval procedures. In simple terms, provisional sums are a sum of \"emergency reserve funds\" set aside by the employer (the project owner). Their characteristics can be summarized in the following 3 aspects: (1) The purpose is not fixed. Provisional sums are used for expenses that cannot be anticipated at the time of contract signing, such as the need for additional work due to unexpected boulders encountered during trench excavation, increases in the volume of work resulting from design changes, or sudden claim incidents ； (2) The control lies with the employer. The use of provisional sums requires approval from the employer; the contractor (construction party) cannot disburse them at will, and each expenditure must be approved through a visa by the employer ； (3) The remaining balance shall revert to the employer. At the time of final settlement for the project, if there is a remaining amount from the provisional sums, that amount shall not be included in the total settlement amount and must be returned to the employer ； If the actual expenses exceed the provisional amount, the excess portion must be paid separately in accordance with the contract provisions (usually borne by the employer). If an itemized list for a residential project includes a separate entry of \"provisional amount of 500,000 yuan\", and additional costs of 300,000 yuan arise during construction due to design changes requiring insulation for the exterior walls, such costs can be covered from the provisional amount upon confirmation by the employer ； Upon completion, an amount of 200,000 yuan remains as a provisional sum; this amount belongs to the employer and is not included in the final settlement. Provisional estimate: A provisional estimate refers to the unit prices provided by the project owner in the bill of quantities for materials, construction equipment that are necessary for the project but whose costs cannot be determined at this time, as well as the costs associated with specialized work. The key here is “it inevitably happens”. This indicates that the cost will definitely be incurred during the implementation of the project, but the price cannot be determined at the time of signing the contract (due to fluctuations in material prices, or because the professional services have not yet been bid for). Therefore, a provisional price is set as part of the total contract amount, with adjustments made later based on the actual costs.
According to the pricing specifications, provisional estimates are divided into three categories: provisional estimates for materials, provisional estimates for equipment, and provisional estimates for specialized works. (1) The provisional estimate for materials refers to the main materials that are essential for the project but whose prices have not yet been determined at the time of procurement, such as rebar, concrete, and exterior wall stones. Only the ‘unit price’ is estimated; the quantity of work is calculated based on the bill of quantities or actual measurements. Its characteristic is that the material to be used is fixed, but the unit price is not; the actual unit price must be determined through bidding, cost inquiries, and other methods, after which the cost is adjusted using the formula “actual unit price × actual volume of work”. For a office building project that requires a \"dry-hung marble exterior wall\", the price of marble was subject to significant fluctuations at the time the contract was signed; therefore, the estimate for marble in the schedule was set at 380 yuan per square meter, with a total area of 1200 square meters ； During construction, the actual unit price was determined through cost inquiries to be 420 yuan per square meter; the final settlement was calculated as “420 yuan per square meter × 1200 square meters”, replacing the original estimated price. (2) The provisional estimate for engineering equipment refers to the core equipment that must be installed in a project, such as elevators, central air conditioning systems, fire control units, etc. It operates on a similar principle to the provisional estimate for materials, but the focus is on \"equipment\" rather than \"materials\". Estimate the “unit price of equipment” (including the original cost of the equipment, shipping and handling fees, etc.); the quantity is determined based on the list ； (3) The provisional estimate for specialized works refers to those specific tasks that are inevitable in a project but need to be carried out by specialized subcontractors (such as fire protection work, low-voltage electrical work, curtain wall work, fine finishing work, etc.). Since the bidding process for such subcontractors has not yet taken place at the time of contract signing, it is not possible to determine the total cost. The provisional estimate for professional engineering represents the total cost (including labor, materials, equipment, management fees, profits, etc.), rather than a unit price ； Its characteristic is that the implementation of the specialized project is definite, but the total subcontract price is not fixed; subsequently, the subcontractor and the actual total price must be determined through bidding for the specialized project, after which the original estimated total price will be replaced. The provisional sum for professional work includes \"all costs related to subcontracted works\", and the contractor shall not charge any management fees or profits on this provisional sum (unless otherwise stipulated in the contract). If a commercial complex project requires a \"fire protection system\", the schedule lists a provisional estimate of 2 million yuan for such work” ； During the construction phase, the employer organized a bidding process for the fire protection works; the subcontractor’s bid was 1.9 million yuan, and this amount was used as the final settlement amount, replacing the original estimated total cost.
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