Risk Evaluation for the use of the Provisional Sums in FIDIC (Red Book) Forms of Contract in the UAE

Risk Evaluation for the use of the Provisional Sums in FIDIC (Red Book) Forms of Contract in the UAE

Ahmad Feras Abdulaziz Arar

Table of Content Table of Content ................................................................................................................... ii List of Figures and Tables ................................................................................................... iv Tables ....................................................................................................................................v Acknowledgment ................................................................................................................ vi Abstract .............................................................................................................................. vii Glossary of Abbreviations ................................................................................................. viii 1 Chapter 1 - Introduction ................................................................................................1 1.1 Introduction ............................................................................................................1 1.2 Research Rational ...................................................................................................1 1.3 Research Aim: ........................................................................................................2 1.4 Research Objectives: ..............................................................................................2 1.5 Hypothesis: .............................................................................................................3 1.6 Outline Methods: ....................................................................................................3 1.6.1 Deskwork ........................................................................................................3 1.6.2 Fieldwork ........................................................................................................3 1.7 Dissertation Structure: ............................................................................................4 2 CHAPTER 2 - FIDIC Forms of Contract in THE UAE ...............................................5 2.1 Introduction ............................................................................................................5 2.2 The UAE Construction Industry .............................................................................5 2.3 Construction Contracts in the UAE ........................................................................6 2.4 FIDIC Forms of Contract .......................................................................................7 2.4.1 History of the FIDIC Forms of Contract .........................................................7 2.4.2 FIDIC Forms of Contract Types: ....................................................................8 2.5 Risk Allocation In FIDIC .....................................................................................10 2.6 FIDIC Forms of Contract in the UAE ..................................................................11 2.7 Local Practice in FIDIC Forms of Contract Usage ..............................................11 2.8 Conclusion ............................................................................................................12 3 CHAPTER 3 - Provisional Sums ................................................................................13 3.1 Introduction ..........................................................................................................13 3.2 Provisional Sums Definition .................................................................................13 3.3 Provisional Sums Types .......................................................................................14 3.3.1 Defined Provisional Sums .............................................................................15 3.3.2 Undefined Provisional Sums .........................................................................15 3.4 Provisional Sums Usage .......................................................................................15 3.5 Provisional Sums Benefits ....................................................................................16 3.5.1 Adding Flexibility to the Contract ................................................................16 3.5.2 Enhancing the Contact Cost Control .............................................................16 3.5.3 Facilitating Subcontractor Nominations........................................................17 3.6 Provisional Sums Risk Allocation ........................................................................17 3.7 Provisional Sums Local Practice ..........................................................................18 3.8 Conclusion ............................................................................................................19 4 CHAPTER 4 - Provisional Sums Risks ......................................................................20 4.1 Introduction ..........................................................................................................20 4.2 Cost Risk...............................................................................................................20 4.3 Program Risk ........................................................................................................22 4.4 Quality Risk ..........................................................................................................22 4.5 Scope Risk ............................................................................................................23 4.6 Subcontractors Nomination Risk ..........................................................................23 ii



4.7 Conflicts and Disputes Risk .................................................................................24 4.8 Fraud Risk.............................................................................................................25 4.9 Conclusion ............................................................................................................25 5 CHAPTER 5 - Research Method ................................................................................26 5.1 Introduction ..........................................................................................................26 5.2 Research Strategy .................................................................................................26 5.3 Primary Data Collection .......................................................................................26 5.4 Secondary Data Collection ...................................................................................27 5.5 Data Collection Techniques..................................................................................28 5.6 Sampling and population ......................................................................................28 6 CHAPTER 6 - Data Collection and Analysis .............................................................29 6.1 Introduction ..........................................................................................................29 6.2 Questionnaire Data Collection and Analysis ........................................................29 6.2.1 Respondents background information ...........................................................29 6.2.2 Analysis for the Provisional Sums Usage in the UAE ..................................33 6.2.3 Analysis for the Reasons of Usage for PS.....................................................38 6.2.4 Analysis for the Provisional Sum benefits ....................................................42 6.2.5 Analysis for the Provisional Sum risks .........................................................44 6.2.6 Analysis for the Provisional Sums failures ...................................................48 6.2.7 Analysis for the FIDIC (Red Book) clarity about Provisional Sums usage ..52 6.2.8 Analysis for the possible measures to improve Provisional Sums usage ......53 6.3 Interviews Data Collection and Analysis .............................................................58 6.3.1 Interviews background information ..............................................................58 6.3.2 Interview with Amer Shehadah .....................................................................59 6.3.3 The interviews with the other interviewees...................................................62 6.3.4 Analysis of the interviews .............................................................................65 6.3.5 Conclusion .....................................................................................................66 7 CHAPTER 7 - Conclusions and Recommendations ...................................................67 7.1 Introductions .........................................................................................................67 7.2 Conclusions ..........................................................................................................67 7.3 Recommendations ................................................................................................68 7.3.1 General Recommendations ...........................................................................68 7.3.2 Recommendations to FIDIC..........................................................................69 7.3.3 Recommendations to the UAE statuary authorities ......................................70 7.4 Future Studies .......................................................................................................70 References ...........................................................................................................................71 Online materials ..................................................................................................................75 Appendices ..........................................................................................................................77

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List of Figures and Tables Figure 2-1 : Construction Industry GDP contribution in the UAE .......................................5 Figure 2-2 : Percentage of construction projects in the UAE different Sectors ....................6 Figure 2-3 Form of Contract Use in the UAE .......................................................................7 Figure 2-4 Risk balance between the Employer and Contractor .........................................10 Figure 6-1 Disciplines of respondents .................................................................................29 Figure 6-2 Respondents years of experience in the UAE ..................................................30 Figure 6-3 Respondents current positions ...........................................................................30 Figure 6-4 Respondents most used forms of contract .........................................................31 Figure 6-5 Respondents knowledge about FIDIC forms of contract ..................................31 Figure 6-6 Respondents most used FIDIC form of contract ...............................................32 Figure 6-7 Respondents most used FIDIC (Red Book) forms of contract ..........................32 Figure 6-8 Percentage of PS usage in FIDIC (Red Book) forms of contract in the UAE...33 Figure 6-9 Average value of PS in the FIDIC based construction contracts in UAE .........34 Figure 6-10 Usage of PS for main project components in UAE .........................................34 Figure 6-11 respondents feedback about increasing the value of PS in the construction contract ................................................................................................................................35 Figure 6-12 Respondents feedback about adding new PS in the construction contract ......36 Figure 6-13 Respondents feedback about adding Particular conditions in the FIDIC (Red Book) from of contract ........................................................................................................36 Figure 6-14 Respondents feedback on the misuse of Provisional Sums by the Employer and Consultants in the FIDIC (Red Book) forms of contract .............................................37 Figure 6-15 Rating PS reasons of usage in the FIDIC (Red Book) from of contracts ........40 Figure 6-16 rating PS reasons of usage in the FIDIC (Red Book) from of contracts (Among the real Estate/ developers and engineering consultants)......................................41 Figure 6-17 Rating the benefits of PS usage in the FIDIC (Red Book) forms of contract .43 Figure 6-18 Respondents perception whether PS add risk to the contraction contracts .....44 Figure 6-19 Respondents perception about who carry the PS risk more in the FIDIC (Red Book) form of contract ........................................................................................................45 Figure 6-20 Rating the risks for usage of PS in FIDIC (Red Book) forms of contract.......47 Figure 6-21 Rating for the reasons of PS failures in the FIDIC (Red Book) forms of contract ................................................................................................................................49 Figure 6-22 Respondents feedback on the risk of using PS for main components of the project ..................................................................................................................................50 Figure 6-23 Subcontractors feedback on the risk of using PS for main components of the project ..................................................................................................................................50 Figure 6-24 Respondents feedback on the responsible party for PS failures in FIDIC (Red Book) forms of contract ......................................................................................................51 Figure 6-25 Respondents feedback on the clarity of FIDIC (Red Book) form of contracts in relation to the PS .............................................................................................................52 Figure 6-26 Respondents feedback on the clarity of the obligations and responsibilities of contracting parties with regards to the PS in FIDIC (Red Book) form of contracts ..........53 Figure 6-27 Respondents recommendations to avoid the risk of PS in the FIDIC (Red Book) forms of contracts .....................................................................................................55 Figure 6-28 Respondents feedback whether PS should be avoided in the FIDIC (Red Book) forms of contract ......................................................................................................56 Figure 6-29 Respondents feedback whether PS Values should be limited in the FIDIC (Red Book) forms of contract..............................................................................................57

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Figure 6-30 Respondents feedback whether PS Values should be limited in the FIDIC (Red Book) forms of contract..............................................................................................57

Tables Table 2-1 FIDIC From of Contracts Development ..............................................................9

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Acknowledgment I would like to express my gratitude to my parents, family members and in particular my wife Hala Hallak who stood with me and lent her support at all times. She was the source of inspiration and her unabated and relentless motivation enabled me to complete my Masters successfully. I drew all the energy needed to complete this difficult task from the eyes of the God’s Gift, my son Abdullah.

My thankfulness and gratefulness will not end without a special mention of my eternal mentor, philosopher and guide my Father professor Abdulaziz Arar. A man of principle as he is, his disciplined life and his approach to tackle all the challenges has made him my role model and was the main source of

encouragement and inspiration to face the

challenges that came in my way. I am eternally indebted to my Mother Souzan Al Yafi who prayed for me all the time and sacrificed her life for my well-being.

I express my sincere thanks and gratitude to my supervisor Professor Krisanthi Seneviratne for imparting her rich knowledge and guiding me at all levels in my research and submitting the papers.

Finally, my thanks to all my professors, lectures and staff at Heriot Watt University and in particular the institution for delivering a topnotch education and bestowing me with a priceless Masters Degree.

Ahmad Abdulaziz Feras Arar

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Abstract Provisional Sums are very commonly used in the FIDIC (Red Book) forms of contract in the UAE construction industry. The local practices on dealing with the Provisional Sums have exposed the contracting parties to wide range of risks. This research examined the reasons for use, the benefits, failures and risks of these sums in the UAE, and introduced techniques and measures to limit the risks associated with their use. The research started with comprehensive literature review for the reliable references related to the research topic, this is flowed by qualitative survey among the UAE construction industry professionals. The survey results were organized, preliminary analyzed and presented to six professionals in the construction industry who have long experience and wide knowledge of the research topic through limited semistructured interviews, the data collected from the interviews were used to verify the survey data and close any gaps in it. The research highlighted many ideas about the best use and risk mitigation of the Provisional Sums and introduced some techniques, measures and recommendations to balance between the benefits and risks for their uses.

Key Words: FIDIC, Provisional Sums, Risks, the United Arab Emirates, Construction Contracts

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Glossary of Abbreviations BMI

Business Monitor International

BMS

Building Management System

BOQ

Bill of Quantities

CC

Construction Contract

ID

Interior Design

FIDIC

Federation International Des Ingeniures – Couseils

FIDIC (Red Book)

FIDIC (Red Book) Forms of Contract

GCC

Gulf Cooperation Council

JCT

Joint Contracts Tribunal

ICE

Conditions of Contract Standing Joint Committee

MC

Main Contractor

MEP

Mechanical, Electrical and Plumping

NEC

New Engineering Contract

NGO

Non-governmental organization

UAE

United Arab Emirates

PC

Prime Cost

PS

Provisional Sum

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1

1.1


Chapter 1 - Introduction

Introduction

Most people who are in the construction industry aware about what called Provisional Sums. Some of them have clear idea about what they are and how to deal with them; others consider them as puzzles! The general impression that Provisional Sums mean quite different things to the different people, they are part of almost every construction contract and they have been traditionally included, priced and used in contracts till their use became unexceptional and perhaps sometimes without pre-thinking. But this can lead to unwelcome surprises epically for Employers (Suttie, 2013).

1.2

Research Rational

The term ‘Provisional Sum’ is quite common term in the construction contracts and is usually used for the works still under design or their costs is unknown at the time of signing the construction contract. Provisional Sums are can be defined as contingency sums and their existence in the contract do not necessarily suggest any obligation on the employer to spend them. They are simply a method for the employer to express part of the budget of the project in the main contract (Murdoch and Hughes, 2000).

The Provisional sum items are commonly used in most of FIDIC Forms of Contract especially in the absence or limitation of adequate information and details about the works to be done, or when the works require the involvement of nominated sub-contractors which are difficult to price accurately in advance (Diab and Hutama, 2012).

Having the nurture of contingency, the Provisional Sums are usually forming about 5% to 10 % of the overall contract sum. However, in the events where a project requires a special technology for specialized type of construction such as nuclear research facility, the Provisional Sums might make up a considerable amount of the contract sum (Diab and Hutama, 2012).

In the UAE and according to survey conducted in 2010 within the construction industry professionals, the figures showed that the top reasons for using the Provisional Sums were 1



the employers eager to commence the construction of their projects in short time, their interest to have better control on the project budget and to have the freedom on nominating specialist sub-contractors who they trust their work quality (Skaik, 2010).

Skaik (2010) survey additionally confirmed that the use of Provisional Sums has inflamed by the economic crisis which heated the world and GCC countries in 2008. According to Ameer (2013) in some projects the value of Provisional Sums increased to form almost 50% of the project total value, and in some other cases the percentage was even more. With this increase of the use for Provisional Sums and due to their uncertain nature, the risks related to cost uncertainty, schedule incorporation, quality and scope control logically increase the project overall risk.

In light of the above, there is real need to understand the effect of expanding the use of the Provisional Sums in the construction contracts and to identify the kind of the risks associated with this use. In addition, there is a need to introduce the required guidelines which need to be respected to limit these risks and avoid any negative effects on the construction industry in the UAE.

1.3

Research Aim:

To provide a professional guideline for the use of Provisional Sums in the FIDIC (Red Book) Forms of Contract in the UAE

1.4

Research Objectives: 1- To analyze the general use of Provisional Sums in FIDIC (Red Book) forms of

contract in the UAE construction industry. 2- To assess the kind and nature of benefits and risks for the use of Provisional Sums

in the FIDIC (Red Book) forms of contract in the UAE construction industry. 3- To examine the UAE practice in using and dealing with Provisional Sums in

FIDIC (Red Book) forms of contract. 4- To introduce techniques and measures to limit the risks associated with the use of

the Provisional Sums in FIDIC (Red Book) forms of contract in the UAE.

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1.5


Hypothesis:

The excessive use for the Provisional Sums in the FIDIC (Red Book) Forms of Contract expose the contracting parties to uncontrolled and major risks related to the cost, schedule, quality and scope.

1.6

Outline Methods:

1.6.1 Deskwork The research will start by having comprehensive literature review for the FIDIC Forms of Contract, the framework for the use of Provisional Sums in the UAE, and the benefits and risk for using the Provisional Sums in the FIDIC (Red Book) form of contacts. This will be achieved through collecting the information from official statistics including academic research journals, refereed conferences, dissertations, specialist reports , states and organization publications such as FIDIC Forms of Contract different editions, Guide to the use of FIDIC and FIDIC contracts guide, In addition to that the data will be collected through analyzing and critically appraise the content of some archival documents including newspapers, journals, magazines, other UAE diaries and publications such as construction week, MEED, gulf construction.

1.6.2 Fieldwork The research will examine the current practice in dealing with the Provisional Sums in the FIDIC (Red Book) Forms of Contract through qualitative survey among the UAE construction industry professionals. The questionnaire will be developed from the information collected from the literature review and will have open and close questions targeting the collection of qualitative information. The survey will be done randomly by approaching respondents from the targeted sample either electronically or thorough short structured personal interviews to collect the salary feedbacks manually. The survey results will be organized, preliminary analyzed and presented to six professionals in the construction industry who have long experience and wide knowledge of the research topic through limited semistructured interviews. These interviews will help the researcher in verifying and analyzing the survey data and complete the research conclusion and recommendations. 3


1.7


Dissertation Structure:

To ensure the coverage of the dissertation topic from the different angles the structure of the dissertation will be formed as per the followings:

Chapter 1: presents the research rationale, aim, objectives and hypothesis. In addition, the chapter will provide also briefed idea about the deskwork and field work of the research and research structure. Chapter 2: Literature review presents the importance of construction industry in UAE and the need to protect this sector from all risks related to the construction contracts. This chapter will provide the required background information about the used Forms of Contract in the UAE and detail out the types, editions, features, risks and UAE local practices while using the FIDIC Forms of Contract. Chapter 3: Literature review provides comprehensive details about the research topic, including the definition, types, usage, benefits and risk allocation of the Provisional Sums in FIDIC (Red Book) Forms of Contract. In addition to close look to the UAE local practices while dealing with them. Chapter 4: Literature review explores the risks related to the use of Provisional Sums in the FIDIC Forms of Contract in relation to the cost, program, quality, scope, subcontracts nomination, conflicts, disputes and fraud in general and review the influence of UAE local practice on these risks. Chapter 5: Presents the research strategy, primary and secondary data collection approaches and techniques. Chapter 6: Analysis the data and test the hypothesis Chapter 7: Presents the research conclusions and recommendations.

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2

2.1


CHAPTER 2 - FIDIC Forms of Contract in THE UAE

Introduction

Relaying the importance of construction industry in UAE and the need to protect this sector from all risks related to the construction contracts. This chapter will provide the required background information about the used Forms of Contract in the UAE and detail out the types, editions, features, risks and UAE local practices while using the FIDIC Forms of Contract.

2.2

The UAE Construction Industry

The construction industry is one of the major economic sectors in the UAE. Based on the outcomes of research published by Construction Week (2013), the construction industry as shown in figure 2-1 contributed to the UAE’s GDP 10.6% in 2008 and 10.3% in 2011 and it is expected to contribute 11.1% and 11.5% in 2015 and 2021 respectively.

Figure 2-1 : Construction Industry GDP contribution in the UAE

According to Business Monitor International (BMI), the construction industry as illustrated in finger 2-2 comprised 31% of the projects in the construction sector and the remaining 69% is distributed on the energy, utilities, transport and social infrastructure sectors (Construction Week, 2013).

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Figure 2-2 : Percentage of construction projects in the UAE different Sectors

Taking into the account these contributions for construction industry in the UAE economy makes the need to protect this sector from any risks quite essential and demanding. The contractual framework of the construction projects is one of the key elements which the successful of the construction industry rely on. There are many risks make a construction contract different from any other type of contract, these include the construction complexity, projects length and size, the uncertainty of the scope and the cost as the project proceeds. Hence, the allocation of these risks is quite important part of the contraction contract as they always lead eventually for additional cost (Adriaanse, 2010).

2.3

Construction Contracts in the UAE

The project constructions are executed through construction contracts mainly (Niaz, 2010) wherein the rights and obligations of the contracting parties are communicated through the conditions of contact (Rameezdeen and Rodrigo, 2014). Due to the difficulty of drafting new contract for each new project, the standard forms of contract were evolved over the years (Rameezdeen and Rodrigo, 2014). Adriaanse (2010) highlighted the advantages of these forms indicting that they spread the risks equitably between contracting parties, save the cost and time of negotiating them and make the comparison between bidders easier as the risk allocation is the same for each bidder.

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These are many construction forms of contract currently used around the world; the International Federation of Consulting Engineers (FIDIC) Forms of Contract considered the most used forms internationally and in the UAE (Kerr et al., 2014). In a survey conducted among the UAE construction professionals by Jayaweera (2009), the results as shown in figure 2-3 indicated that 79% of the respondents are using FIDIC Forms of Contract, 4% NEC and the remaining 17% are using different kind of contracts such as JCT and ICE.

Figure 2-3 Form of Contract Use in the UAE

2.4

FIDIC Forms of Contract

The FIDIC forms of contract are largely used in the UAE construction industry especially FIDIC (Red Book) 1987 and 1999 editions , the Abu Dhabi Government have utilized it for many of its project since 2007, Dubai relayed on FIDIC (Yellow Book) to award Dubai metro project in a design and build kind of agreement (Ingmire, 2013). Reviewing the history of FIDIC and understanding its different forms of contract and editions is key element to understand its risk allocation and balancing.

2.4.1 History of the FIDIC Forms of Contract The FIDIC history return back to 1913 where it was founded in France, Belgium and Switzerland (Hakim 2008), The first edition for the FIDIC Forms of Contract has been commonly used for the project construction internationally from 1957 (Glover et al 2006) and this was based on the standard conditions of contract of the domestic project in the United Kingdom (Wade, 2006). 7



Since then the FIDIC Forms of Contract have been developed and expanded to include number of standard forms of contract between the various parties such as the employers and consultants, the employer and contractors, the contractors and their subcontractors (Wade, 2006).

2.4.2 FIDIC Forms of Contract Types: The present suite of FIDIC contracts often best known by their colors (Ibanet 2014) and the most commonly used FIDIC forms of contracts in the current days are the Red, Short Red, Green, Orange, White and Yellow Books.

The Red Book or the conditions of contract for works in the civil engineering construction, is used for the works designed by the employer or the project consultant and executed by the contractor through defined scope of work. However, the scope may include some of the engineering packages that need to be designed and constructed by the contractor under the supervisor of the employer of the project consultant. The Short Red Book is small version of the Red Book depends to large extend on its conditions; it is used for relatively small projects with small amount of investment or short terms works, this form allow for some engineering packages to be designed by the contractor under the supervision of the employer or the project consultant (Artyushenko, 2014).

The Green Book or the conditions of subcontract for the construction works in civil engineering is another member of the FIDIC family and mainly used for engaging the subcontractors under the main contractor. While the Yellow Book or the conditions of contract for the electrical and mechanical works is best used in the supply and installation of electrical and mechanical equipment or to procure the electrical and mechanical packages within a main contract under the FIDIC Red Book (Artyushenko, 2014).

The White Book or the conditions of client and consultant model service agreement and this form is used specify for the consulting scope (Artyushenko, 2014).

The Orange Book is the conditions of contract for design-build and turnkey kind of agreements, and where the priority is the completion of the project within the allocated budget and time. In this form the contractor carry the complete liability of the project 8



development with minimum involvement from the employer. And the Silver Book or the condition of contact for EPC Turnkey (engineering, procurement and construction) and BOT project (Build, Operate and Transfer) is used wherein the employer requires the contractor to undertake the design, supply, construction and operation of the project (Artyushenko, 2014). The first published FIDIC Forms of Contract published in 1957 has followed the 4th addition of the ICE Conditions of Contracts (Rameezdeen and Pajapakse, 2007), since then the FIDIC Forms of Contract developed and expanded to include complete set of standard Contracts suitable for all different type of works and contracting parties of the construction industry. The Figure 2-4 shows the key milestone of FIDIC development since 1963 till date.

1963 the “Yellow Book” for the mechanical and electrical works was produced (FIDIC conference 1999 ) 1980 New addition of the “Yellow Book” with some enhancements was issued (Hakim 2008). 1987 The 4th edition of the “Red Book” was issued after comprehensive review for the old edition wherein the Engineer was given a lead role in taking decisions (Hakim 2008). 1994 New forms for the Red and Yellow Book were issued to suite the international industry (Hakim 2008). 1995 The first edition to the “Orange book” was published for the use in the design and build kind of projects (Roe 2007). 1996 Supplements to the Red and Yellow Books were introduced to provide the users with alternative arrangements including the ability to have a lump-sum contract rather than BOQ (Glover 2007). 1999 Issued new updates for the Red and yellow Books to comply with the development and changes in the construction industry. In addition, the Silver to deal with EPC/Trunkey kind of contracts and the Green Book for small kind of contract were introduced (Hakim 2008). Table 2-1 FIDIC From of Contracts Development

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2.5


Risk Allocation In FIDIC

The prime function of any contract is to allocate the responsibilities and liabilities for the risks between the different contracting parties (Smith, 2008), FIDIC is not an exception. In his introduction for the first edition of FIDIC conditions of contract in 1957, the FIDIC president Julian S. Tritton explained that the purpose of these conditions as “the fair allocation of risk between the Contractor and Employer” (Koksal, 2011).

As illustrated in figure 2-5 the FIDIC condition of contracts provide this required balance between the contracting parties and allocate the risk to the party that is the best to control, manager and sustain the consequences (Nader 2012) . The 4th edition of 1987 of its “Red Book” considered good example for the fair balancing between the employer and contractor and due to that it is one of the most used editions for local and international construction works and has contributed to successful completion to big infrastructure projects and buildings around the globe (Koksal, 2011).

Figure 2-4 Risk balance between the Employer and Contractor

However, as described by Koksal ( 2011) many employers and contracting authorities are adding to the original FIDIC forms of contract some additional conditions (particular conditions) to forward the risk towards the contractor, such practice has led to major and long lasting disputes between the contracting parties , the reasons behind that according to Rameezdeen and Rodrigo (2014) is that most of these conditions who usually developed by non-legal practitioners make the contract less clarity and more difficult to read, they recommended accordingly that the modification to the standard FIDIC forms of contract

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can be only made when there is a real need for them which can’t be avoided. Koksal (2011) concluded in his research that the particular conditions should not be used by the employers to relocate the risks to the contractors as the main purpose of these conditions should be to regulate the form of contract accordingly to the project nature and country specific.

2.6

FIDIC Forms of Contract in the UAE

According to Jayaweera (2009), Kerr et al (2014) and Nambiar (2010) the FIDIC forms of contract are the most used standard forms of contract in the UAE as per, Hakim (2008) referred that to standard forms compliance with the local practices and the employers requirement especially after adding some particular conditions to shift some additional risk to toward the contractors. Kerr et al (2014) indicated the most use FIDIC forms of contract are the Red, the Yellow and the Silver, however there are some limited exceptions where different kind forms of contract are being used, such as Abu Dhabi government departments who are using amended version of FIDIC 1999 Red and Yellow Books with major shift for the risk towards the contractor. In Dubai some of the government departments such as Road & Transportation Authority and Dubai Municipality are using 1987 FIDIC Red Book with revisions to impose additional risk and obligations on the contractor.

2.7

Local Practice in FIDIC Forms of Contract Usage

Risk allocation in the FIDIC forms of contract is not different from any other place in the international construction market, as such the Employer carry the risk related to the law changes and the other special risks of the war, rebellion and riots, at the same time the contractor carry the risk of the inflation of materials, labor and consumables (Kerr et al, 2014). In most of the cases the general terms of contracts in FIDIC are amended through what became quite often known as particular conditions tend to shift some of the risk to the contractor such as stringent the claim notification clauses, increasing the period in which the construction can be suspended, providing termination rights to the Employer, expanding the penalty clauses related to the contractor defaults and removing the contractor entitlement for the extension of time costs per Kerr et al (2014).

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At the same time, regardless to the standard from of contract used the construction contracts for the project which are executed in the UAE are subject to the influence of the UAE law. Accordingly the clauses in the construction contracts which limit, cape or exclude the loss of profit are enforceable and some other clauses can’t be excluded and considered to be part of any construction contracts such as

-

Any provision which completely exclude the guilty party for the responsibility will be avoided.

-

A limitation of liability cannot be relied upon where the defendant has committed a serious fault.

-

The designers, engineers and contractors are all bound by decennial liability form 10 years from the completion or handover of the project.

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The court can override a contractually agreement compensation and change it to be equal to the actual lost.

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The court or arbitrator in exceptional circumstances can reduce the oppressive obligation to reasonable level Kerr et al (2014)

2.8

Conclusion

The FIDIC forms of contract are the most common forms of contract in the UAE. At the same time FIDIC (Red Book) 1987 and 1999 editions are the most used standard forms of contracts for the works designed by the employer or the project consultant and executed by the contractor through defined scope of work. The balanced risk allocation, the coherence and the existence in the UAE construction industry for long time are all factors contribute balance can be major and should be taken into account while examining the risks related to it usage in the UAE.

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3 3.1


CHAPTER 3 - Provisional Sums Introduction

This chapter will be providing a comprehensive literature review for the use of Provisional Sums in the construction contract generally and in the FIDIC (Red Book) based contracts particularly. It will include background information about the Provisional Sums definition, types, usages, benefits, risk allocation and the local practice of using them in the UAE.

3.2

Provisional Sums Definition

The Provisional Sums are allowances in the BOQ for works that foreseen but not particularly determined during the tender stage of the project and before signing the construction contract with the contractor (Ross and Williams, 2013). FIDIC (1987) indicate that these sums can be used for the execution of any part of the construction works or even not construction related works).

“for the execution of any part of the works or for the supply of goods, materials. Plant or services” (FIDIC, 1987)

Provisional sums can also be included in the contract as contingency for the work that is unexpected (Ross and Williams, 2013).

“A sum included in the Contract and so designated in the Bill of Quantities ... for contingency” (FIDIC Red Book, 1987)

The amount of money reserved under in the BOQ under the Provisional Sum items can be used totally, partially or not at all (Ross and Williams 2013). This use can be done upon instruction of the Engineer to the contractor to execute the works related to the provisional sum item and in this case the contractor will be entitled for only the allocated amount for such item.

“the Contactor shall be entitled to only such amount in respect to the work, supply or contingencies to which such provisional sums relate” (FIDIC Red Book, 1987)

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Both edition 1987 fourth edition and 1999 FIDIC (Red Book) allow for two options for provisional sums execution, the first by requesting the Contractor to undertake this work and the other through nominated subcontractor

“In respect of every Provisional Sum the Engineer shall have authority to issue instructions for the execution of work or for the supply of goods, materials, Plant or services by: (a) the contractor , in which case the contractor shall be entitled to an amount equal to the value thereof determined with Clause 52, and (b) a nominated Subcontractor, as hereinafter defined, in which case the sum to be paid to the Contractor therefor shall be determined and paid in accordance with Sub-Clause 59.4 .” (FIDIC Red Book, 1987)

In the case were the Provisional Sum will be executed by the Contractor, both version of FIDIC (Red Book) of 1987 and 1999 have referred to the Variation clause obligating the contracting parties to evaluate the cost of this item as a variation. However, in the case were the Provisional Sum will be executed by nominated subcontractor who usually get selected by the Employer, both version of FIDIC have referred to the Nominated Subcontractors Clause obligating the contracting parties to evaluate the cost of this item in accordance with the actual amount to be paid through the subcontractor and the overhead and profit to be paid to the contractor.

3.3

Provisional Sums Types

Many forms of contract such as JTC Design and Built contracting (Pickavance, 2013) distinction between two types of Provisional Sums “defined” and “undefined” (Ross and Williams, 2013).

In both FIDIC (Red Book) 1987 and 1999, there is no distinction between both types of the provisional sums. Regardless the type of Provisional Sums whether they are defined or undefined the FIDIC deal similarly with them. However, most of the standard method of measurement adopted in most of the FIDIC based contracts distinguishes between the defined or undefined provisional sum items (Practical Law,2010).

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3.3.1 Defined Provisional Sums These Provisional Sums deemed to be have been accounted in the contract BOQ and the contractor price, at the same time the contractor would have allow in his baseline program for the inclusion of the works related to these provisional sums (Ross and Williams, 2013).

Defined Provisional Sums usually have sufficient information about the kinds and types of the works related to them allow the contractor to incorporate them in the financial and schedule planning of his contract.

3.3.2 Undefined Provisional Sums These Provisional Sums may not be accounted in the contract BOQ and contract sum, at the same time the contractor may not incorporate the performance of the works under these Provisional Sums items in the baseline program (Ross and Williams, 2013).

Undefined Provisional Sums usually have no enough technical details for the contractor to incorporate them in his financial and schedule planning.

3.4

Provisional Sums Usage

The Provisional Sums are intended to use in the contracts for many reasons such as to cover the cost of a work, package or item in the main contract which there is no enough information or details are available about it at the tender stage and that it would be difficult to calculate its cost and price accurately (Emmitt and Yeomans, 2008), an example about that when the engineer is uncertain whether the dewatering works will be required in the project as this will be known only after completing the excavation works (Practical Law Construction, 2010), or when some of the project packages such as landscape, exterior lighting, interior design, steel structure elements...etc. are still under the design process and not ready to be issued to the contractors during the tendering stage

Provisional Sums also used to cover the cost of a works which should be done by specialist contractor (Emmitt and Yeomans, 2008), an example about that is when the work need to be carried out by the nominated contractor of the statutory authority or service providers, or when the employer trying to utilizes new technology (Practical Law 15



Construction 2010) due to be developed in the future such as some of the BMS and security systems, or when the employer trying to award a construction package to a subcontractor on the bases if the design and built kind of agreement such as exterior lighting package.

3.5

Provisional Sums Benefits

3.5.1 Adding Flexibility to the Contract The Provisional Sums allow the Employer and the Engineer to include in main contract the works that he may or may not carry out. Unlike the Prime Cost items which their existence in the contract obligate the contractor to execute them (Jenkins and Stebbings, 2006), the Provisional Sums items are subject to the Engineer determination and he has the freedom of using the allocated sum for these items totally, partially or not at all (FIDIC, 1987). Provisional Sums give also the Employer and the Engineer the option to execute the work related to these sums either by the contractor or nominated subcontractor through clear mechanisms to determine the cost, overhead and profit of the involved contractors (FIDIC, 1987).

Provisional Sums allow the Engineer to deal with some of the construction packages in the cases where it is not feasible to be finalized during the tender stage or in the absence of clear scope at the time of tendering. Meanwhile, they protect the contractor interest by avoiding him taking the risk of pricing unknowns and guarantee him the advantage of getting the attendance and mark ups without much effort and in some cases without much financial expenditure (Ameer, 2013) . In addition it allows the Engineer to include in the main contract some untraditional takes to the main contractor such as supply some of the non-construction materials and the payment of authorities fees (Skaik, 2010).

3.5.2 Enhancing the Contact Cost Control The provisional sums can be any works related to the construction packages including the supply of the materials, goods, plant and services (FIDIC, 1987). This feature gives the ability to the Engineer and Employer to include in the construction contract all the related cost to the project construction till its completion and guarantee them more control on the procurement and expenditures of these sums. 16



The Provisional Sums can be used also as contingencies (FIDIC, 1987) without obligating the Employer to compensate the contractor for the lost in profit in the case on not using these sums. Having these contingencies in some kind of projects which has complex funding structure or exposed to some uncertainties can be vital factor for their stability and continuity.

3.5.3 Facilitating Subcontractor Nominations FIDIC (Red Book) give the authority to the Engineer to execute the Provisional Sum items by nominating subcontractor. One of the main advantages of the subcontractors’ nomination mechanism of the Provisional Sums that it gives the Employer better control over the cost, time and quality (Murdoch and Hughes, 1996).

Samer Skaik (2010) in his research about the subcontracting nomination in the UAE, he indicated that the Employer can benefit from many thing due to this nomination as it gives him the opportunity to obtain more competitive prices from the market, providing him more time to balance between the cost and the quality to achieve better value for the money, and granting him the required flexibility to negotiate the subcontractors. These outcomes in line with what Atkinson (1999) gone for that the nomination give the employer the opportunity to appoint the best subcontractor not the lowest price.

Skaik (2010) in his description to the benefits of subcontracting confirmed that the subcontracting not only enjoy the Employer but also the Contractor as well by improving the efficiency of construction program by releasing him from the procurement process of some of the packages and allowing the Employer to nominate the subcontractor he trust for some of the packages that he requires especial care or quality while dealing with them.

3.6

Provisional Sums Risk Allocation

The Provisional Sums add uncertainty to the construction contract and their inclusion in the BOQ identifies that the main contractor is not required to take the risk of pricing part of the scope related to these sums (Robinson, 2013).

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This uncertainty is mainly related to the schedule, the cost and the scope of the project (Skaik, 2010).

Uncertainty in the schedule as the execution of the provisional sum items is directly linked based on the FIDIC condition of contract by the engineer instruction when he decides to execute these items (FIDIC, 1987). And, uncertainty in the cost as the provisional sums may be used in part or in full subject to the engineer instructions during the execution of the works (FIDIC, 1987). And, uncertainty in the scope as the information in the construction contract about provisional sum items are usually limited (Ashworth et al 2013).

3.7

Provisional Sums Local Practice

The provisional Sums are usually estimated by the project quantity surveyors or the project consultant and included in the BOQ in separate section for the bidders to price the overhead and profit of these items (Skaik, 2010).

According to Whitelaw (2007) the estimation for the Provisional Sums are not prepared in the way supposed to be done. This is can be expected due to the absence of the required detailed designs and specifications of these items in most of the cases and the limited capability to for the estimator to determine the final cost as such.

At the same time, the inclusion of the Provisional Sum items in the tender provide a tender allowance for known work that cannot be appropriately measured or valued until later time in the project (Ashworth et al, 2013), this make the pricing for the attendance of Provisional Sum items difficult for the contractors how most of them relay on their experience to predict the fair value for the attendance of these items.

In THE UAE and based on the researcher experience, during the post tender negotiations between the employer, engineer and contractor the talks can help the contractor to have better idea about the intent of each provisional sum item and the negotiations with the employer can lead for the waiver of some uncertainties and in some cases it allow for an agreement on the detailed scope of the items.

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In FIDIC (Red Book) the mechanism to reflect the works related to the provisional sum items on the project program of the project is unclear (Practical Law, 2014) taking into consideration that the contractor require the engineer instruction to execute the works. However, the provisional sums considered to be part of the contractor scope and he is obligated to the take them into condensation while planning to complete the project construction, accordingly most of the contractors include these items in tier project program.

In the UAE and based on the researcher experience, most contractors include the provisional sum items in the project programs due in very early stage of the project and in some cases on the critical path of the program, this tactic is used by the contractors to put pressure on the employer and engineer to finalize the design work of these items at the beginning of the project and to make their determination accordingly, at the same time they reserve their right to claim extension of time should the engineer delay the instruction for the execution of the provisional sum items.

3.8

Conclusion

Provisional Sums in FIDIC is an allowance or contingency in the construction contract used to execute any part of the works to supply goods, materials, plant or service, It can be used totally or partially, it can be defined or undefined and in both cases FIDIC deal similarly with them.

Provisional Sums used in the FIDIC based contracts (Red Book) to cover the cost of the works to be executed by the main contractor or subcontractors when there is no enough information at the tendering stage to price for these works or when the target is to engage a specialist subcontractor to deal with special kind of construction packages.

Provisional Sums provide flexibility to the construction contract scope, enhance its cost control and provide the employer and the engineer great work frame to facilitate the subcontractor nominations. At the same time, Provisional Sums add uncertainties to the construction contract from the schedule, cost and scope perspectives which require close management from the contracting parties to avoid any negative consequences from the associated risks. 19


4 4.1


CHAPTER 4 - Provisional Sums Risks Introduction

The Provisional Sums in the FIDIC forms of contract add uncertainty to the construction contact. The FIDIC contracts guide (2000) explained the effect of the Provisional Sums that they reduce the degree of certainty of the final contact price and according to Ameer (2013) the Provisional Sums are the prescription of the tender documents and having none is the best. In addition to the cost related risk the provisional sums risks can be expanded to include the project schedule, quality, scope and other aspects. This chapter will include detailed literature review on all associated risks for the use of Provisional Sums in the FIDIC (Red Book) forms of contract.

4.2

Cost Risk

In an article to Omoniyi (1996) he indicated that the Provisional Sums considered one of the main factors for the increase of the final construction contract sums, Ipko (2008) found that the average increase in the value of Provisional Sums is about 40%. The direct reason for that based on Ogunsemi (2007) and Olusegun (2010) mainly related to the nonpreparation of the technical drawings and the inclusion of arbitrary figures for the provisional sum in the BOQ. Ameer (2013) added to that another factor related to the inflation in the cost of the Provisional Sums after the main contract award by at least to 10% increase.

This cost uncertainty can cause major problem for the projects which have fixed budget, these projects usually have especial funding arrangement through banks or private NGOs, Most employers of such kind of projects would choose to have Lump-Sum contacts to achieve the required cost certainty and avoid the cost increase risk, but if major parts of these contracts are made up of Provisional Sums the Lump-sum contracts will be nothing of that sort, because the actual cost for executing these Provisional Sums might be after all more than what have been estimated and included in the lump-sum contracts (Suttie, 2013).

It is logically to think that the risk associated with the increase or decrease of the project value can be absorbed by the contracting parties when the provisional sums form limited 20



percentage of the contract. However, in the cases where the provisional sums form considerable percentage of the contact value the risk can be major (Chan and Yeong, 1995).

Olusegun (2010) in his research about the cost adjustment of the provisional sums he confirmed that the more provisional sums are included in the BOQ the less precise and realistic the initial contract sums will be if compared to the final cost. In his recommendations to reduce the negative effect of the this adjustment Olusegun (2010) state that the Employer and the Engineer should make sure to provide the quantity survivor adequate detailed drawings to help him in providing accurate estimation of the provisional sums.

The FIDIC contracts guide (FIDIC, 2000) gives similar recommendation for the users of FIDIC Forms of Contract regarding importance of having only defend Provisional Sums in the contract and to include realistic estimation for them

“It is important to define the scope of each Provisional Sum, because the scope will be excluded from the other elements of the Contract price” (FIDIC, 2000)

“the amount to be included in each Provisional Sum should include a realistic estimate of the final amount which is anticipated to be used” (FIDIC, 2000)

The FIDIC contracts guide (2000) also emphasis that the Provisional Sums can be used on whole or in part but cannot exceed their value in the BOQ nor can the Engineer or the Employer add new ones.

“Provisional Sums are defined as any sums specified in the Contact as provisional sums, so the Engineer or Employer cannot add new Provisional Sums …. Also, cannot increase the amount of a Provisional by Variation or otherwise” (FIDIC, 2000)

The FIDIC (RED Book) does not give the Engineer to increase the value of the Provisional Sums (Robinson, 2013); enforcing such increase may lead to conflict between the contracting parties.

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4.3


Program Risk

The Provisional Sums for defined work are deemed to be accounted in the contractor time schedule and preliminaries pricing (The FIDIC contracts guide, 2000). However, as the execution of provisional sums controlled by the engineer instructions to the contractor they are often not included in the schedule of the projects, and in the cases when the contractors include provisional sums in the project schedules, they are not properly accounted. Even when the engineer provide the contractor with the required details about the scope of the Provisional Sums the contractors normally fail to incorporate the activities related to these sums in the project schedule which create difficulties to the contractor to justify any delay in the construction or a claim for extension of time (Diab and Hutama, 2012).

As per FIDIC (Red Book) from of contract the Employer cam execute the provisional sums through nominated subcontractor, the complexity of the nomination procedure is can cause delay for the project. According to Sakik (2010) the greater the percentage of the nominated packages the greater the impact on the project time schedule.

The FIDIC’s Red Book is not quite clear about the relation between the provisional sums and the project schedule and does not grant the contractor the right to claim for extension of time for delaying the instruction of expenditure or provisional sum scope details or even the appointment of nominated subcontractor (FIDIC 1978).

The FIDIC contracts guide (FIDIC, 2000) gives emphasis of the importance of having only defined Provisional Sums with clear scope and realistic estimate which logically give the contractor better chance incorporate these sums in the project program accurately.

“it might be also be necessary to clarify the timing of any relevant instructions related to the work covered in a provisional sum” (FIDIC 2000)

4.4

Quality Risk

Provisional sums usually deals with construction packages in most cases are not detailed enough or estimated accurately at the time of the tendering (Ogunsemi and Olusegun, 2010), once the construction contract singed the Engineer will be under pressure to 22



finalize the design of the works related to the Provisional Sums so they can be executed on the proper time. However, the Engineer under the pressure of any claim from the the main contractor related to the delay of issuing the expenditure instruction of the Provisional Sums may not be able to ensure the proper technical coordination between the different technical packages (Sakik, 2010), or he may choose to trim the scope or the design of these provisional sums to not exceed their wrongly estimated value which can cause reducing the quality of the related works in particular and the project in general.

4.5

Scope Risk

The Engineers tend to include part of project scope as Provisional Sums either to satisfy their Employers by enabling the project construction early or to collect their design fees earlier than scheduled in their consultancy contracts, and in some cases for both reasons. According to Ameer (2013) this kind of arrangement exposes the Employers to at least 10% inflation in Provisional Sum values and to an increase of 5% in the overall value of their contract values. This can be acceptable to some Employers as completing their project earlier will guarantee them early collection for the profit compensate such loss, but some others would mean that to them losing big portion of their profit.

At the same time, the inadequate definition of the Provisional Sums and the poor coordination of their scopes with the main contractor scope may cause for variation and claims from the main contractor. FIDIC contracts guide (2000) emphasizes on the importance of having defined scope for all the Provisional Sums included in the construction contract.

4.6

Subcontractors Nomination Risk

According to Ameer (2013), some of most of the works which is not included in the original tender and done after the contact award shall be subcontracted and defiantly going to cost more than if was included in the tender. Sakik (2010) studied in his the risk related to the nomination of subcontractors in details, and as Provisional Sums one of the main tools the Employers and Engineer using to deal with subcontractors nomination they share the same risk accordingly.

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These is no disagreement in the construction industry about the risks related to the subcontractors nomination producers, some of these risk related to the cost uncertainty as the nomination packages are usually inaccurately estimated, other related to the scope conflicts and mis-coordination which drive for variations in most cases. These risks drive sometimes for extension of time claims due to the delay on nominating the subcontractors and they might eventually cause conflicts between the contracting parties can harm the relation between them and impact the project negatively (Sakik, 2010)

4.7

Conflicts and Disputes Risk

According to Whitelaw (2007) the wrong estimation and cost uncertainty of the Provisional Sums can lead for destroying in the relation between the Employer and Contractor and can further create conflicts, disputes and legal proceedings.

Some of these conflicts according Sakik (2010) related to the subcontractor nomination producers which may require executing some or all of the provisional Sum items in the contraction contract. Such conflicts can occur when the main contractor and the subcontractor are not willing to sign a back to back contract by which the main contractor passes the same obligation and liabilities towards the employer to the subcontractor (Herbert Smith, 2011). Egglestone (2001) identify more than a reason for the subcontractor rejection to sign back to back contract with main contractor such as having pervious conflicts between them, having poor safety records, having no financial stability, having no adequate insurance or having no trust. Nevertheless the rejection can simply be related to the loss of interest by the main contractor in the nomination because of the low attendance margin of the Provisional Sums or the reluctant of the main contractor to include the works related to these sums under his scope. The conflicts related to the subcontracting do not stop with the nomination producers and singing the agreements. According Akintan and Morledge (2013) subcontractors have the habit of not providing the required workmen in the site, not meeting the work programs and not coordinate with main contractors to overlap the work activities, this fuel the conflicts and may lead to disputes.

The conflicts related to the Provisional Sums are not limited between the Employer, Contractor and the Subcontractor but also it can happened between the Employer the 24



Engineer, some of these conflicts described by Ameer (2013) the waiver of the Employer right to deduct from the contractor liquidated damages which are a kind of penalty applies when the contractor cause the Employer delays and lost on the profit collection. This happens usually due the Engineer delay on issuing of the required information or instruction to the main contractor to execute the Provisional Sum works or nominating the subcontractors to do so, the Engineer usually recommend for the extension of time without deducting the associated liquidate damages benefiting from the additional supervision fees related to this extension and causing the Employer lost to the supervision fees and the forgoing delay penalties.

4.8

Fraud Risk

According to Ameer (2013) favoritism, inside dealings and phantom companies are risks related to some or most of the works which the will be done by subcontractors should they not decided at the time of the project tendering. He described the Provisional Sums as irregularity bordering fraud as it may lead to frauds.

4.9

Conclusion

The risks related to the Provisional Sums are many and the increased value of Provisional Sums increases the uncertainty in the construction contract accordingly. The value limitation, accurate estimation, detailed scope are all factors can lead to the control of the Provisional Sums related risk but cannot change their uncertainty nature of them.

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5

5.1


CHAPTER 5 - Research Method

Introduction

This chapter will detail out the research method and techniques used to conduct this research. It will firstly justify the reason for adopting qualitative strategy, and then explains the fieldwork and desk study approaches which were used for the research data collection and finally will introduce the chosen survey approach.

5.2

Research Strategy

According to Naoum (2007) there are two types of research strategies which are the quantitative and the qualitative researches, the selected type of research depends on many factors such as the purpose and type of the study and the availability of the information required to conduct the research. To determine the suitable research strategy related to the dissertation topic, the researcher has used Bryman (1988) list which identify the differences between the quantitative and qualitative research. Accordingly the qualitative strategy has been adopted due to close the relation between the researcher who is working as construction project manager in Dubai and the research topic related to the construction contracts, the ideographic scope of findings and as the role of research is to provide attitude measurement based on the professional feedbacks, views and opinion for the risks of usage of Provisional Sums in the FIDIC (Red Book) Forms of Contract in the UAE.

5.3

Primary Data Collection

The data collection approach depends on the nature of the investigation and the type of information that are required and available (Naoum, 2007), accordingly the researcher examined the different approaches for data collection to conduct the research.

The researcher initially studied the possibility of adopting cases study approach for multiple projects in the UAE as this approach can provides in depth analysis for the problems and risks related to the use of Provisional Sums in the FIDIC (Red Book) Forms of Contract, but due to the confidentiality terms attributed to most of the contraction projects in UAE and the limited ability to access and analysis adequate number of the projects the cases study approach was avoided. The action research approach has been also 26



examined however, the need for accurate identification for the problems and risk related to the use Provisional Sums form more than one source of information drive the researcher to adopt alternative approach.

The researcher adopted eventually the survey approach as a primary date collection approach for the research taking into account the limited time frame required for this approach and generalized results which can be obtained out of it should the right sample be chosen. The survey will be general analytical among the construction industry professionals to establish as described by Naoum (2007) a relationship and association between the attributes of the questionnaires.

The questionnaire will be established from the information collected from the literature review and will have open and close questions targeting the collection of qualitative information. The open questions can allow the respondents to provide their opinion while the closed questions allow the researcher to collect factual data can be easy analyzed (Skaik 2010).

5.4

Secondary Data Collection

Due to the limitation of the research and studies about the topic of the research there will be no secondary data and the researcher will depend to large limit on the data collected from primary research.

In order to ensure the reliability of the primary data, the researcher will be having a pilot study with eight respondents for the questionnaire to ensure the clarity of the questions and to avoid any ambiguity on them. At the same time the researcher will be having limited semistructured interviews with six professionals in the construction industry who have long experience and wide knowledge in the research topic. The interviews will be conducted after completing the primary research survey to enable the researcher verify the survey data and close any gaps in data to be able to complete the research conclusions and recommendations.

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5.5


Data Collection Techniques

The questionnaires will be distributed in two ways, electronically by emails to the respondents include invitations to participate in the survey by completing it online through surveymonkey.com application, or paper-based through short structured personal interviews wherein the respondents can complete the survey manually. The questions will be simple to avoid any ambiguity or confusion and limited as much as possible to ensure the cooperation of all participants.

5.6

Sampling and population

As the topic of the research is related to construction industry in the UAE and as the awareness and experience in the FIDIC (RED Book) Forms of Contract and the Provisional Sums related benefits and risk is essential to answer the questionnaire questions, the invitation to participate in the survey will be will sent randomly and will be limited to the UAE construction industry professionals such as Employers, Engineers , contractors, Sub-contractors and Project Managers who are familiar with the topic of the research.

The targeted number of survey responses is 50 and the survey will be conducted in 7 days duration and will take place in three different geographical locations within the UAE.

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6 6.1


CHAPTER 6 - Data Collection and Analysis Introduction

This chapter will analysis and discuss the data collected through the survey and the interviews. The analyses and discussions will be examining the survey results and the interview feedbacks takin into account the data collected from the literature review. 6.2

Questionnaire Data Collection and Analysis

The questionnaire was established from the information collected from the literature review; it included open and close questions targeting the collection of qualitative information. 6.2.1 Respondents background information The invitations to answer the questionnaire were forwarded to about 150 of the UAE construction industry professionals who are familiar with the research topic. Out of the 150 invitations 70 responses were received. After conducting initial review for the responses 10 were excluded due to lack of knowledge in the research topic or adequate experience in the UAE construction industry. Out of the remaining 62 responses only 53 were completed fully the other 7 completed partially. The respondents profile transgressing from different backgrounds within the construction industry, figure 6-1 indicate that the majority of the respondents are consultants, contractors and developers, 25% are subcontractors and project managers. As the subcontractors are main party when it comes to the execution of the Provisional Sums, the parentage of the respondents would have been better if the number of respondents was more. However, no major effect on the research is expected as the employers, consultants and contractors are the decision makers in relation to the Provisional Sums use in the UAE.

Figure 6-1 Disciplines of respondents

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figure 6-2 indicate that the most respondents or about 80% of them have at least 5 years of experience in the UAE, only 16.67% has less than 5 years of experience in the UAE but that does not mean that they don’t have more experience in the construction industry elsewhere as some of them occupying senior and managerial positions by reference to figure 6-3, these positions increase the chances that they are familiar with the issues related to Provisional Sums in the UAE construction industry and their ability to have a say on that. Figure 6-3 gives also good idea about the ranking of the different respondents as it shows that 66.67% of them have senior or managerial levels in the companies that they are currently working, 23.33% of them occupying senior manager and director levels.

Figure 6-2 Respondents years of experience in the UAE

Figure 6-3 Respondents current positions

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Figure 6-4 shows that the FIDIC forms of contract are the most used standard forms of contracts among the respondents, this high percentage of users confirm the popularity of the FIDIC forms of contract in the UAE construction industry as the findings of literature review also suggested. At the same time figure 6-5 refers to high degree of the knowledge about the FIDIC forms of contract among the respondents as less than 2% of them consider themselves having poor knowledge about it, this gives high level of reliability to the validity of the collected data.

Figure 6-4 Respondents most used forms of contract

Figure 6-5 Respondents knowledge about FIDIC forms of contract

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Figures 6-6 and 6-7 show that over 90% of the respondents use FIDIC (Red Book) from of contract at most among other FIDIC forms, half of respondents use FIDIC (Red Book) 1987 fourth edition and the other half use the 1999 edition. This high level of experience among the respondents with regards to FIDIC (Red Book) which is equally distributed between its both editions provides the collected data the needed balance and reliability.

Figure 6-6 Respondents most used FIDIC form of contract

Figure 6-7 Respondents most used FIDIC (Red Book) forms of contract

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6.2.2 Analysis for the Provisional Sums Usage in the UAE In order to understand the market practices in using the Provisional Sums and study their effects on any related risks in, the questionnaire included some questions to highlight these practices in the UAE construction industry.

On a question about the parentage of usage of Provisional Sums in the FIDIC (Red Book) construction contracts, the majority of respondents as shown in figure 6-8 suggested that the Provisional Sums forming between 80% to 100% from the construction contacts and over 96% suggested that they exist in over 60% of these contracts. When the respondents requested to advice on the average value of these Provisional Sums if compared to the overall value of the contracts, 34.55% of them as shown in figure 6-9 suggested that value is anything between 40% to 50%, and over 70% suggested that the value is more than 30% of contraction contract values. These high percentages comply with the finding of research literature review and justify the researcher desire to evaluate the risks behind this extensive usage for the Provisional Sums.

Figure 6-8 Percentage of PS usage in FIDIC (Red Book) forms of contract in the UAE

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Figure 6-9 Average value of PS in the FIDIC based construction contracts in UAE

With regard to technical nature for Provisional Sums usage in the UAE construction industry and whether the respondents have witnessed this usage for main components of the project, the numbers as illustrated in figure 6-10 came to suggest that the majority of respondents and as high as 96.36 % acknowledge that the inclusion of main components is very common market practice in the UAE. This figure justifies the high value of Provisional Sums in the UAE construction contracts (see figure 6-9)

Figure 6-10 Usage of PS for main project components in UAE

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In order to know more about the market practice while dealing with Provisional Sums within the contractual work frames, the respondents were asked whether in a signed FIDC (Red Book) form of contract the Employer has the right to increase the value of a Provisional Sum item or to add new one. Over 80% of the respondents as shown in figure 6-11 indicated that the Employer has the right to increase the value of Provisional Sum item, while about 60% of them as shown in figure 6-12 indicated that the employer has the right to add new item. These high percentages reflect relatively high level of acceptance in the UAE construction industry to exercising such acts by the Employers. Although the standard FIDIC (Red Book) forms of contract are not quite clear whether the Employer and Engineer have the right to increase the value of existing Provisional Sum or to add new ones. This can be justified by the wide use for Practical Conditions in the UAE construction industry as illustrated in figure 6-13, over than 60% of the respondents indicated that they are dealing with Practical Conditions most of the time when dealing with FIDC (Red Book) forms of contract, 33% said that they are having them only sometimes. The Particular Conditions usually attach additional clauses to the standard form of contract to give the Employer and the Engineer additional rights and to carry the Contractor additional obligations some of them can be related to the Provisional Sums.

Figure 6-11 respondents feedback about increasing the value of PS in the construction contract

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Figure 6-12 Respondents feedback about adding new PS in the construction contract

Figure 6-13 Respondents feedback about adding Particular conditions in the FIDIC (Red Book) from of contract

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After asking the respondents about their feedback on the UAE construction instruction practices while dealing with Provisional Sums, there was a need to ask them a key question whether actually there is a problem in the local practices with regard to the use of the Provisional Sums. Therefore the were asked whether they believe that Provisional Sums have been misused by main the Employers and Consultants how they considered the key decision makers planning and including the Provisional Sums in the FIDIC (Red Book) forms of contract. The figure 6-14 shows that 71.70% of the respondents confirmed that the Employers and Consultants have been misused the use of Provisional Sums, while about 25% of them confirmed otherwise. These reasons and justifications behind these figures will be subject to more investigation once the use, benefits and risks of the Provisional Sums analyzed.

Figure 6-14 Respondents feedback on the misuse of Provisional Sums by the Employer and Consultants in the FIDIC (Red Book) forms of contract

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6.2.3 Analysis for the Reasons of Usage for PS To understand the reasons which motivate the different parties in the UAE construction industry to use the Provisional Sums and examine the logical justification behind their popularity, the respondents were asked to rate ten reasons for using the Provisional Sums in the FIDIC (Red Book) forms of contact. These reasons were established from the researcher literature review taking into account the international and local practices for using Provisional Sums.

The score for most chosen reason was 85.40% as shown in figure 6-15 and was related to the inclusion of untraditional packages in the main contracts. This result comply with the typical use of the Provisional Sums and indicate that the majority of the Employer and the Engineers are clear on the best use for these sums in the contraction contacts.

At the same time, over 80% of the respondents linked between the usage of Provisional Sums and the subcontracting nomination, the data in figure 6-15 suggest that in average 84.40% of respondents choose the second main reason for using Provisional Sums as facilitating the nomination process for subcontractor or to award some of the packages in a design and build kind of arrangement. This high score comply with the local practice for the usage of the Provisional Sums.

The results also show a common understanding among the respondents that the Provisional Sums can be the solution in the absence of clear or detailed scope for some of the project components, whether the reason for this absence related to the rush on tendering the project and getting the construction commenced in short time or due to difficulties on defining the scope and cost of the works related to the Provisional Sums, in average 83% of the respondents agreed to place these reasons between the three most important reason for using the Provisional Sums.

On the other hand, it is surprising to find that the reasons related to the expedition of the tendering and construction commencement and to control the quality of some important packages to the employer are the sixth and seventh respectively on term of importance, this contradict with what most of the respondents gone for as a top benefits for the Provisional Sums (refer figure 6-17). This can be due to the fact that these reasons for

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usage is only well known for the respondents who came from Real Estate or Engineering Consultant backgrounds, figure 6-16 shows that this reasons got high voting when the respondent results from such backgrounds got isolated.

The reason related to limiting the scope of main consultant and awarding some packages to the subcontractors who the employer trusts has given less importance by the respondents. This is expected as this reason related to only limited Employers who have some kind of formal or informal partnering with subcontracting companies or they are committed to use their family business companies to handle the construction of parts of their projects to achieve the required commercial benefit or targeted quality or branding that they are looking for.

The less chosen reasons by the respondents were the reasons related to the budget control and contingency. This can be argued that these reasons are mainly related to the Employers who they use the Provisional Sums as tools to control their project budgets and to fund any unexpected cost during the project construction, this usually happen in the project which has special funding structure or when the level of uncertainty related to the scope is high. However, with the current level of high liquidity in the market and the increase of the property rates generally in the UAE (Layhuani,2014) the employers are not under pressure to over plan their project budgets and contingencies stringently in light of the availability of the cash from the end users.

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Figure 6-15 Rating PS reasons of usage in the FIDIC (Red Book) from of contracts

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Figure 6-16 rating PS reasons of usage in the FIDIC (Red Book) from of contracts (Among the real Estate/ developers and engineering consultants)

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6.2.4 Analysis for the Provisional Sum benefits To understand the benefits that the different parties in the UAE construction industry seek to have from the usage of the Provisional Sums and study the balance between these benefits and the risks for using them in the other hand, the respondents were asked to rate five benefits for using the Provisional Sums in the FIDIC (Red Book) forms of contact.

As illustrated in figure 6-17, the top benefit selected by the respondents scored 72.40% and was related to shortening the project development duration. This is understood as the common practice in the UAE to overlap between the project design and construction stages as much as possible to save time and allow the construction commencement at earliest and benefit from the early collection for the profit, this overlapping force the consultant to rush the preparation of the tender documents and include some unfinished design packages as Provisional Sums so the tender process can start. This practice not only save time in the design development process but also the tendering as the bidders are required only to include their attendance rates for these sums without reviewing their details, calculating the quantities or providing detailed pricing for them.

The second highest score for the Provisional Sums benefits was enhancing the quality and value of the project, this benefit was in average selected by 71.60% of the respondents. This high parentage mainly related to the flexibility which the Provisional Sums give the Employers to nominate good subcontractors who can offer them better technical standards without much concern about the allocated budget or the scope related variations, claims and conflicts. This argument is justified by the low rating average of the other benefits which were presented to the respondents.

The options of the Provisional Sum benefits which are related to saving money and control the project cost were scored about 60% of the respondents, the figure 6-16 shows sharp split between the respondents between who agree and who disagree about these benefits. This can be returned to the different way which the different respondents look to these benefits taking into account the uncertainty factor related to them.

The least chosen benefit by the respondents was related to the reduction of claims, variation and conflicts. This comply with the respondents feedback about the risks of

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using Provisional Sums as most of them considered the claims, variation and conflicts as highest risk for this use (refer figure 6-20).

Figure 6-17 Rating the benefits of PS usage in the FIDIC (Red Book) forms of contract

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6.2.5 Analysis for the Provisional Sum risks To examine the respondents’ perception whether the use of the Provisional Sums in the FIDIC (Red Book) forms of contract can add risk to the construction contracts, the overwhelming feedbacks and over than 80% of the respondents as shown in Figure 6-18 agreed that they add risks to the construction contracts. This complies with the hypothesis of the research and proves that there is common opinion in the UAE construction industry about the uncertainty nature and risks related to the use of Provisional Sums in the FIDIC (Red Book) forms of contract.

Figure 6-18 Respondents perception whether PS add risk to the contraction contracts

In another question to the respondents about who carry the risk of Provisional Sums from the contracting parties in the FIDIC (Red Book) forms of contract, 80% of the respondents as shown in figure 6.19 referred that to the Employer while 20% referred that to the Contractor. This projection of the percentage toward the Employers can be understood taking into condensation that the Employers carry the risks in relation the delay of expenditure of the Provisional Sums or to the cost increase whether it is related to wrong estimation of market inflation. Meanwhile, the stand of the 20% of respondents who indicated that the Provisional Sums add more risk to the contractor can be defended by the view of the respondents as shown in figure 6-20 which suggest that there is common understanding among the contracting parties that at the end they all share the risks related to the project. 44



Figure 6-19 Respondents perception about who carry the PS risk more in the FIDIC (Red Book) form of contract

In more detailed question, the respondents were asked to rate the risks for using the Provisional Sum items in the FIDIC (Red Book) forms of contract, the risk related to the claims, variations and conflicts among the parties has scored 78.60% as shown in figure 620, this is the highest score among other seven risks were presented to the respondents, having this risk in the top of the other risks considered logical taking into account that the claims, variations and conflicts are risks shared among all contracting parties.

Meanwhile, three other risks have scored more than 70% by the respondents are directly related to inflation, cost increase and cost uncertainty which give good idea about the agreement among the respondents for the financial risks related to the use of Provisional Sums. This finding comply with the literature review finding and confirm the need to develop the required work frames while dealing with Provisional Sums in the FIDIC (Red Book) forms of contract to ensure good cost control of these sums.

Another risk has got high score related to the scope conflicts and mis-coordination of the Provisional Sums, figure 6-20 shows that 34 respondents out of 55 agreed that this is a risk; only 10 respondents disagreed about that. This can be understood as most of the Provisional Sums would not be fully detailed during the tendering stage or even after signing the construction contact, once the detailed design for these sums completed there 45



will be a need for some coordination between the main contractor and consultant adopt the scopes related to the Provisional Sums into the ongoing construction works with minimum variations to the main contractor scope. This can be more complicated incase the works of these Provisional Sums will be subcontracted as the coordination would be in this case among larger number of parties with totally different priorities and interests.

The risks related to the delay in the project construction and completion was between the least two scored risks by the respondents, however the percentage of respondents who recognized and agreed about the existence of this risk was almost 50%, this high percentage give indication about the seriously on this risk and the other risk which scored higher rates.

The lowest rated risk which got the vote of only 30% of the respondents was the risk related to the quality reduction of the Provisional Sum works. This is can be understood as the majority of the respondent views that the Provisional Sums enhance the value and quality of the project (refer figure 6-17)

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Figure 6-20 Rating the risks for usage of PS in FIDIC (Red Book) forms of contract

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6.2.6 Analysis for the Provisional Sums failures To understand the most common reasons behind the failure of the Provisional Sums in the FIDIC (Red Book) forms of contact and realize the factors and parties which contribute on the creation of their risks, the respondents were asked to rate a set of reasons established from the research literature review.

The top two reasons for the failure of Provisional Sums in the FIDIC (Red Book) forms of contact got almost the same rating score of 82% were as figure 6-21 illustrate, firstly is having undefined scope with about 90% agreement among the respondents and secondly having main components as Provisional Sums with almost 82% agreement on this. These percentages comply with the findings of literature review and justify the increase of the risk with the increase of the scope uncertainty and increase of the Provisional Sum values. To confirm this direct correlation between the usage of Provisional Sums for main components and the increase on the project overall risk, the respondents were asked whether this usage for the main components of the project should be avoided, the figure 622 shows that over than 60% of the respondents answer positivity, this parentage is quite high taking into account that some of the respondents came are from subcontracting companies and it would be against their interest to see the Employers avoiding the usage of Provisional Sums for the main components of the projects, this was confirmed when the results of respondents who declared that they are working in subcontracting companies were isolated, the figure 6-23 confirm that as only 11% of the respondents from subcontracting background have supported this avoidance.

The third reason for the failure of Provisional Sums which chosen by the respondents was related to the wrong estimation of Provision Sum, figure 6-21 indicate that about 85% of the respondents agreed that the is common reason of failure, this percentage comply with the findings of literature review as a correct estimation for Provisional Sum items can be almost impossible due to the absence of detailed scope especially when dealing with main and completed parts of the project.

At the same time, the poor coordination as reason for Provisional Sums failure has scored 76.80% by the respondents, this parentage consider high taking into account that 72% of the respondents agreed on this reason for failure, this can be understood due to the risk

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attributed to the mis-coordination between the different contracting parties which were previously explained. The reasons related to the contractual complications, mismanagement and inflation were given less importance by the respondents. However, all the reason have been scored highly as shown in figure 6-21 which indicate that all listed common reasons behind the failure of the Provisional Sums were recognized by the respondents.

Figure 6-21 Rating for the reasons of PS failures in the FIDIC (Red Book) forms of contract

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Figure 6-22 Respondents feedback on the risk of using PS for main components of the project

Figure 6-23 Subcontractors feedback on the risk of using PS for main components of the project

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After rating the reason of the Provisional Sums failure in the FIDIC (Red Book) from of contracts, the respondents were requested to identify the parties which carry the responsibility of these failures should ever happen. The scores as shown in figure 6-24 came to suggest that 44 respondents choose to carry the responsibility the Employers, 30 to the Engineer, 17 to contractor and 6 to the nominated subcontractor.

The researcher doesn’t think that the results reflect the true distribution of contractual responsibility among the different contracting parties in the event of Provisional Sums failure. The researcher believes that the results are only continuity to common cross blaming games in the UAE construction industry between the different parties. However, the figures give an idea about the general attitude of the contracting parties when failure related to the Provisional Sums happed and justify the high score for the risk related to variations, disputes and conflicts which was discussed previously (refer figure 6-20).

Figure 6-24 Respondents feedback on the responsible party for PS failures in FIDIC (Red Book) forms of contract

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6.2.7 Analysis for the FIDIC (Red Book) clarity about Provisional Sums usage To examine whether FIDIC (Red Book) forms of contract are clear about the Provisional Sums and understand whether there is a real need to develop the FIDIC clauses or adding Partial Conditions related to these sums to further control their use, the respondents were asked about the clarity of the FIDIC (Red Book) forms of contract while dealing with Provisional Sums. As shown in figure 6-25 about 60% of the respondents indicated that there FIDIC (Red Book) is clear and about 28% said otherwise. And in more specific question about the FIDIC (Red Book) is clarity when it comes to the responsibilities and obligations of the different contracting parties with regard to the Provisional Sums, as illustrated in figure 6-26 about 50% of the respondents indicated that there FIDIC (Red Book) is clear about that and about 41%stated otherwise. Although the respondents who choose the negative sections are the minority in both questions, the researcher believes that there is a need to understand the reasons behind these selections to be able to analysis identify any legitimate reasons behind that. Accordingly the matter related to the clarity of FIDIC (Red Book) will be investigated further in the interviews which the researcher will be conducting with some professionals in the construction industry who have long experience and wide knowledge in the research topic.

Figure 6-25 Respondents feedback on the clarity of FIDIC (Red Book) form of contracts in relation to the PS

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Figure 6-26 Respondents feedback on the clarity of the obligations and responsibilities of contracting parties with regards to the PS in FIDIC (Red Book) form of contracts

6.2.8 Analysis for the possible measures to improve Provisional Sums usage The researcher toke the feedbacks of the respondents about the best way to mitigate the risk related to the use of Provisional Sums in the FIDIC (Red Book) forms of contract, a list nine of recommendations were presented to the respondents derived from the research literature review. Figure 6-27 shows the respondents rating for these recommendations and indicate that the most of them have been received positively by the respondents.

The most selected recommendation with a score of 85.60% was to avoid tendering without having comprehensive and clear scope for all Provisional Sums. This comply with the FIDIC contracts guide to avoid the use of undefined Provisional Sums in general as this increase the risk of wrong estimation, scope conflicts and the variations.

The recommendation related to the Incorporation of Provisional Sums execution in the project program has scored 79.60 % by the respondents, while limiting the value of Provisional Sums in the contract scored 78.40%. The inclusion of the Provisional Sums in the project program can avoid the project delay by controlling their scope delivery, expenditure instructions, subcontractor nominations and execution. At same time limiting their values reduce the overall uncertainties in the contract. 53



The respondents also gave good scouring with 77.40% for the recommendation related to the education and training for the staff on dealing with the Provisional Sums, this is logical as the local practices seemed to be controlling the Provisional Sums more than the terms and conditions of the FIDIC (Red Book) forms of contract do as highlighted previously (refer figure 6.2.2)

The recommendations related to the collaboration of all different parities with the main contractors were in range of score of 73.60% to 76.20% and occupied the sixth and seventh grad in the respondents’ importance level as shown in figure 6.27. Based on these recommendations a list of approved subcontractors would be shared with the main contractor for him to choose the suitable company to engage in a “back to back” kind of agreement to execute the works of Provisional Sums, the other recommendation allow the bidders to price the Provisional Sum items to verify the accuracy of their estimations and give the bidders more control undertake the execution of these sums either by themselves or through subcontractors.

The least scored recommendations were related to the reduction of Provisional Sum numbers and adding Particular conditions. Both recommendations as shown in figure 6.27 have scored 67.60%. Although these two recommendations were in the bottom of the list, the figures shows that over 50% of the respondents have indicated there agreement to them.

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Figure 6-27 Respondents recommendations to avoid the risk of PS in the FIDIC (Red Book) forms of contracts

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To further examine the respondents recommendations on the use of the Provisional Sums in the FIDIC (Red Book) form of contract, they were asked whether the this use should be avoided. As illustrated in figure 6.28 about 62% of the respondents agreed that the use of Provisional Sums should be avoided as much as possible.

The parentage was a bit higher when the respondents request to give their feedback on limiting the maximum value of provisional Sums in the FIDIC (Red Book) form of contract by certain parentage, as shown in figure 6.29 about 68% of them agreed with limiting the Provisional Sums value while 22.64% disagree that. The respondents who agreed on liming the value of Provisional Sums were then asked to provide their recommendations on the range of parentage which Provisional Sums should not exceed. As shown in figure 6.30, about 27.50% of the respondents choose to range the value of Provisional Sums between “0% to 10%”, 24.50% choose the range between “10% to 20” and rest of respondents have chosen a range beyond the 30%.

Figure 6-28 Respondents feedback whether PS should be avoided in the FIDIC (Red Book) forms of contract

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Figure 6-29 Respondents feedback whether PS Values should be limited in the FIDIC (Red Book) forms of contract

Figure 6-30 Respondents feedback whether PS Values should be limited in the FIDIC (Red Book) forms of contract

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6.3


Interviews Data Collection and Analysis

In order to ensure the reliability of the conducted survey and close any gaps in the data collected to be able to meet the research objectives, the researcher had limited semistructured interviews with six professionals in the construction industry who have long experience and wide knowledge in the research topic. The interviews done after the survey completion and the data collected from the interviews will be studied in conjunction with the data collected from the survey to complete the research conclusions and recommendations. 6.3.1 Interviews background information The interviews were conducted in person with all six interviewees, the interview questions were read at the beginning of the interview so they interviewees can have an idea about the kind of questions that they will be asked and a clarification from the researcher had been provided to them when they sensed any ambiguity in the questions. Out of six interviews, five of them were recorded and one has been transcript during the interview. Below is a list of the professionals who were interviewed with brief description about their experience:

1- Amer Shehadah: Contracts Manager at Diamond Developers and head Supervision & Contracts Manger at Al Ajmi Engineering Consultants with 22 years of experience in civil engineering and project management 9 years of them in the UAE, during his long experience he worked as Consultant and Developer.

2- Salah Dabash: Director of Projects Development at Mada’in Properties PJSC with 30 years of experience in civil engineering and project management 25 years of them in the UAE, during his long experience he worked as Consultant, Contractor and Developer. 3- Karim Abou Alnasr: Senior Construction Manager at Commodore Construction with 14 years of experience in civil engineering and project management 9 years of them in the UAE, during his carrier he worked as Consultant, Contractor and Developer.

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4- Omar Daoud: Contracts Engineer at Al Ajmi Engineering Consultants with 21 years of experience in civil and contract engineering 9 years of them in the UAE. 5- Aji Varughese: Area Manger of Projects at Al Ajmi Engineering Consultants with 20 years of experience in the UAE in civil and civil engineering and project manager. 6- Khalid Saleh: MEP Supervision Manager at Al Ajmi Engineering Consultants with 12 years of experience in the UAE in MEP engineering and project management, during his carrier he worked as Consultant, Contractor and Developer.

6.3.2 Interview with Amer Shehadah The interview conducted with Amer Shehadah was the most comprehensive and detailed interview, this is mainly related to his long experience in dealing with FIDIC (Red Book) forms of contract and the usage of Provisional Sums in these kinds of standard contracts. Accordingly his interview will consider as a base to analysis the other interviews.

In question to Shehadah about the use of Provisional Sums in the UAE, he confirmed that the Provisional Sums are used in 70% to 90% of the projects with average value of 40% to 50%. He highlighted that usually all systems or solutions which require specialists are considered as Provisional Sums such Aluminum and glazing, MEP works, lifts works and in some cases the ID Works.

Shehadah indicated that the reason of the existence of Provisional Sums in the FIDIC (Red Book) forms of contract is to overcome tightness of the lump-sum nature of these contracts, and in addition to give the required flexibility and dynamism to deal with variations in this type of contracts. According to him this is quite important features especially for the users in the UAE where there are always changes whether coming from the Employers side or the authorities’ side or even due to some discovers in the site that the changes would be needed to deal with them.

Shehadah confirmed that the Provisional Sums are a leeway for the Employer to include some works that he may request the main contractor or subcontractors to handle and he

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may execute them or not, this avoid the Employer the compensation claim and variations from the main contractor. At the same time Shehadah confirmed that the other reason for the use of the Provisional Sums is mainly related to the Engineer by avoiding him to detail these sums and leave that to specialist companies to do so during the construction in a form of shop drawings, in another part of the interview Shehadah return that to the limited time that the Engineers usually given by the Employers to obtain a building permit from the authority in away do not help them to detail all the whole project.

About the benefits of the Provisional Sums, Shehadah highlighted that beside the flexibility to the Employer to include some undecided works in the main contractor contracts; they give the ability to increase or decrease the value of these main contracts and the flexibility to designate special quality or branding requirements to certain packages.

Shehadah indicated that the suitable percentage of the Provisional Sums to the overall value of contract should be as low as 10%, he argued that with this low percentage the contract can return back to present a true lump-sum contract and the uncertainty would be reduced for all contracting parties. Shehadah added that exceeding this percentage might carry more risk for the contracting parties, as according to the UAE local practice the Provisional Sums are not detailed enough by the Engineers nor studied by the bidders during the tender, the market tendency is to leave these sums to the construction stage which in most cases cause budget deficit and extension of time or quality issue.

In question to Shehadah about the risk of Provisional Sums in the UAE, he summarized the risk is mainly the uncertainty nature of these sums. He detailed that this uncertainty caused by the lack of detailed scope by the consultant, lack of decisiveness from the employer, lack of attention from the contractor and the procurement and time management complexity of these sums. Shehadah highlighted that not mitigating the uncertainty of Provisional Sums can cause their failures; the major failure according to him is the cost which can lead for contractual complications and leave influence on the time and quality of the project.

To understand the UAE professional practice on the way which Provisional Sums included in the FIDIC (Red Book) forms of contract, Shehadah was asked about the way the 60



Provisional Sums being estimated. He advised that in the company that he is working for this usually happened through the benchmarking to similar kind of projects from the database which the company has, he add that in some cases offer from the market are being collected to these sums for verification and to ensure their accurate estimation. Shehadah confirmed that these are the only available options to prepare such estimations taking into account that there is no control for prices in the supply market and there is no declared public benchmarking in the UAE so it can be as reference for Provisional Sum estimations. Shehadah couldn’t confirm that this professional practice that he described is being followed in the other companies in the UAE. However, he think that most probably this is not happening as the feedback that his is receiving from the market does not indicate that and the projects that his company inherited from other companies suffer from fluctuation in the prices of the Provisionals Sums.

With regard to the execution of Provisionals Sums, Shehadah explained that the procurement of the works related to these sums usually start in the site office with preparing of the required drawings, specifications and tender conditions for tendering. Then tender documents then forwarded to the main office for verifications and to handle the tendering process, handing the tender from the main office according to him avoid any fraud. Finally the invitations for tender usually sent to the subcontractors and in some to the main contractor to participate. Shehadah highlighted that in some cases the undefined Provisionals Sums are being awarded in a design and build kind of agreement wherein the subcontractor provide the design or the solution and execute it, this type of arrangement happened specially for the specialist systems such as the lifts and travelators. However, he recognized that the risk when dealing with the undefined Provisionals Sums is more.

In another question to Shehadah with regard to the misuse of Provisional Sums in the FIDIC (Red Book) forms of contract in the UAE construction industry , he answered positively and distinguished between two kind of misusing, the first intentional as when reducing the Provisional Sums value to lower the budget of the project in the main tender to give false indication to the bidders about the project budget, this would make them think that the project budget is stringent and push them to lower their rates, the other intentional misuse is related to the fraud due to the favoritism or the lack of technical experience of the Employer and Engineers to deal with some packages. The unintentional

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misuse is due to the lack of experience of the Employer and the Consultants and in some cases from the contractor side.

With regard to the FIDIC (Red Book) forms of contract clarity when it comes to dealing with Provisional Sums, Shehadah confirmed that FIDIC is very clear; the only unclear matter that he could think of is when the Employer wants to increase the value of a Provisional Sum, but he confirmed that there are some other clauses in FIDIC which reference can be made off to solve this matter. However, in more detailed question to Shehadah about some related aspects to the Provisional Sums he confirmed that is not clear about dealing with disputes as FIDIC is not clear in general about that.

To examine his views on the clarity of FIDIC about the relation between Provisional Sums and the project program, Shehadah was requested to explain how the FIDIC is clear about this relation and how with the existence of Provisional Sums in the construction contacts can the contractor carry the responsibility of the project time, taking into account that the Engineer as per FIDIC controls the process of tendering, subcontractor nomination and the time of expenditure of Provisional Sums. Shehadah argued that FIDIC is quite clear about the responsibility of the main contractor of controlling the project time including the time related to the Provisional Sums; hence the main contractor is obligated to include them in the project program and coordinate with the Employer and the Engineer their timing and executions.

Finally, Shehadah confirmed that the use of the Provisional Sums in the FIDIC (Red Book) forms of contract should be avoided and recommended a maximum of 10% value for them should be included in the construction contract. 6.3.3

The interviews with the other interviewees

Almost all the other interviewees generally agreed with what Shehadah said, the disagreements and the additional points by the interviews is summarized below:

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Salah Dabash discussed the risks related to the sue of Provisional Sums in the FIDIC (Red Book) forms of contract indicating that they reduce the quality of works especially if the allocated budget is not sufficient due to inaccurate estimation, beside that they can cause a delay for the project if the scope was not developed in the right time, they also increase the project cost, cause scope conflicts and increase the chances for fraud. Dabash referred the reason behind the Provisional Sums failures in some cases to the unexperienced staff dealing with specialist packages. At the same time confirmed that the Provisional Sums usage have been misused by all parties, he gave example about that when the actual value of a Provisional Sum get doubled in a clear breach to the FIDIC terms and conditions but still the contracting parties as per the UAE professional practice consider that fine. Dabash confirmed that FIDIC is generally clear about dealing with the Provisional Sums, however there is a need to enhance the clauses related to the payments and the relation with the program. To avoid their risks he recommended minimizing the use of the Provisional Sums to maximum 20% of the main contract value, to give enough time to the Engineer to prepare the project scope without using shortcuts an including some packages as Provisional Sums, to ensure the cooperation between all contracting parties with regards to these sums or to even use different forms of contract which do not relay on the lump-sum kind of agreements.

Karim Abou Alnasr indicated in his interview that Provisional Sums in the FIDIC (Red Book) forms of contract give the Employers more flexibility in the scope and provide them by more options to achieve the targeted quality, he added that main risks related to the usage of these sums beside the projects delay are the disputes and conflicts among contracting parties. He recommended limiting the value of Provisional Sums to only 10% to 201% of the contract value.

Omar Daoud mentioned that the reasons for using Provisional Sums in the FIDIC (Red Book) forms of contracts are the lack of scope and time constrain of the project. He add that the benefits for you using them are many such as, having better quality, better coordination between main and subcontractors and nominating the best suppliers and manufacturers for the project. Daoud highlighted that the main risks related to these sums are the disputes, conflicts, variations and claims. At the same time he confirmed that FIDIC is quite clear on dealing Provisional Sums and no failures are attributed to them.

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Daoud recommended that the Provisional Sums value should not exceed the 30% from the contract value and to avoid using them when you have detailed scope and BOQ.

Aji Varughese highlighted that the main reasons for using Provisional Sums in the FIDIC (Red Book) forms of contracts is to save time and enable the overlapping between the design and construction stages of the project. He confirmed that the uncertainty of these sums the major risk of Provisional Sums and he returned back their failure to the wrong estimation. In order to mitigate the Provisional Sums risk and overcome the lack of FIDIC clarity in some aspects related to them he suggested adding Particular Conditions to return the balance to the construction contract. To obtain the required benefits from the Provisional Sums he recommended to not exceeding 30% of the value of the project, to have the right sections for their technical packages, estimations and subcontractor nominations.

Khalid Saleh referred the use of the Provisional Sums in the FIDIC (Red Book) forms of contract to the culture of the company, as from his experience some in the UAE construction industry; some companies include them in every single project, some others they don’t use them at all. However, he agreed with Shehadah that in average almost 90% of the project in the UAE include Provisionals Sums. Saleh added that the reason for Provisional Sums usage is sometimes return to the wish of the Employer to appointed specific subcontractor that he trust for certain package or to deal with the some packages with some special requirements. He mentioned that beside the risk related to the disputes, conflicts, time wastage, the Provisional Sums can cause scope conflicts. In his comments about the clarity of FIDIC (Red Book) forms of contracts, he indicated that FIDIC is not clear when it comes to Provisional Sums about how to deal with their execution, disputes and inclusion in the project main program. To mitigate their risks, he recommended to avoid the using the Provisional Sum, detail their scopes when they used and agreeing with the main contractor on list of subcontractors that he would be willing to work with them if nominated for these sums.

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6.3.4 Analysis of the interviews The interviewees agreed in many aspects related to the use and risks of the Provisional Sums in FIDIC (Red Book) forms in the UAE, there feedbacks cam mostly in line with the research literature review and the survey result. Here are some of the most important points and outcomes in relation to the conducted interviews. There was a general agreement between the interviewees that Provisional Sums are used in 70%-90% of the FIDIC (Red Book) forms in contract in the UAE construction industry and that the average value of these sums usually between 40% to 50% of the main contract value. Most interviewees recommended this percentage to be reduced to be 10% to 20% of the main contract value.

The majority agreed that the main reasons and benefits of using Provisional Sums in the UAE construction industry are to be overlap between the design and construction stage of the project which allow for time saving, to give flexibility to the Employer to subcontract some packages to meet certain requirements (quality, brand, specific subcontractor, supplier or manufacturer). Each interviewee has some additional reasons different than the other. This is logical taking into consideration that came from different professional background and company cultures.

All interviewees agreed the using the Provisional Sums in FIDIC (Red Book) forms in contract add cost uncertainty to the construction contract and the strong link between the variations, claims and conflicts with these sums. Their opinions were varied on the other related risks related to use of the Provisional Sums, the main reasons mentioned are related to the risks of quality reduction, project delay, scope conflicts and fraud.

The majority of the interviewees agreed that the main reason for the failures of the Provisional Sums can be related to the wrong estimation, lack of detailed scope. Some of the interviewees returned that to the limited experience of the staff of dealing with these sums. The interviewees agreed that the estimation for the Provisional Sums is happening though parametric estimation technique, however the benchmarking data are limited to historical data of each consultancy office separately.

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All interviewees agreed that FIDIC is clear about dealing with Provisional Sums. Some of the interviewees argued that there is room for some enhancements in some clauses to provide more clarity for the FIDIC users. Majority of the interviewees that the Provisional Sums have been misused in the UAE construction industry, to reduce the associated risks for using Provisional Sums the different interviewees recommended reducing the value of Provisional Sums in the main contracts, allow more time to the Engineer to complete the project design and scope before tendering, they suggested different percentages to limit the value of these sums vary from less than10% till 30%. However, all of them agreed about the need to be reduced as much as possible.

6.3.5 Conclusion The survey and interview results are found in line with the literature review. By comparing between the results of the survey and the interviews the results were in close which gives indication about the reliability of the collected data.

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7 7.1


CHAPTER 7 - Conclusions and Recommendations Introductions

This chapter will present the conclusions of the research based on the defined research objectives and recommendations based on the research literature review, survey and interviews to avoid the risk of Provisional Sums in the FIDIC (Red Book) forms of contract and enhance the professional practice for using them in the UAE construction industry.

7.2

Conclusions

The main reasons for the use of the of Provisional Sums in the FIDIC (Red Book) forms of contract in the UAE can be divided to two parts, first part comply with the general use of these sum such as using these them for the un-traditional packages, special works, contingencies and the works which can be only defined in the site. The second part which is more related to the nature of construction industry in the UAE is manly related to facilitating the appointment of nominated subcontractors, overlapping between the design and construction stages in the fast-track projects, expediting the tendering and construction commencement, controlling the quality, cost or scope of some packages due to certain requirements by Employer.

Provisional Sum benefits can be vary according to the their use, in general they save time in the construction commencement and the construction duration, give flexibility to the Employer to subcontract some packages to meet certain requirements in the quality or scope, they enhance the cost control of the project if they used as contingencies to mitigate some risks in the project, they also save cost mainly in the cases of untraditional packages as the main contractors tend to overprice these packages, in addition to that they can reduce the claims, variations and conflicts in some cases specially if the main contractor has no interest to handle some untraditional or complicated packages. Similarly, the risks depend on the nature of the project and their kind of use on the same. The most common risks for Provisional Sums use in the FIDIC (Red Book) forms of contract in the UAE are mainly related to claims, variations and conflicts among the contracting parties. Beside that there are additional risks related to the cost uncertainty, the projects delay and in some cases the poor quality due to scope conflicts, mismanagement or mis-coordination. 67



In UAE there are many factors influent the local professional practices when in come to the usage of Provisional Sums in the FIDIC (Red Book) forms of contract. The rush to start and complete the project constructions made the Provisional Sums in many cases a solution to maximize the overlapping between the design and construction stages and save some time. The complexity of the projects, lack of trust and delicacy of the Employers are factors encouraged the practice of subcontractor nominations; and made Provisional Sums a tool to control the nomination packages and to give maximum flexibility to the Employers in term of cost, scope and variations. These uses for Provisional Sums have contributed in expanding their use in the construction contracts till become almost rarely to find a project without these sums. They become forming large portion of the main contract values and in some cases their value exceeded the 50%. The lump-sum contracts with cost uncertainty equal to half of its value became become nothing of that sort.

The research results came to confirm the risks related to the local practices for the use of the Provisional Sums in the FIDIC (Red Book) forms of contract in the UAE in line of the hypothesis of the research. The research also introduced many ideas about the best use and risk mitigation of these sums and introduced techniques, measures and recommendations to balance between the benefits and risks for their use.

7.3

Recommendations

From the research literature review, survey and interview results here are some recommendations that the researcher believe can enhance the use of Provisional Sums in the FIDIC (Red Book) forms of contract and can mitigate the risk of their use.

7.3.1 General Recommendations The below general recommendations are related to the use of Provisional Sums in the FIDIC (Red Book) forms of contract.

a. To limit the maximum value of Provisional Sums in the construction contracts to maximum 20% of the initial main contracts value.

68



b. To avoid the use of Provisional Sums for the main components of the project as much as possible. c. To use the Provisional Sums for non-tradition technical packages, non – construction materials, contingencies for site related uncertainties, authority and project administrative fees. d. Incorporate the Provisional Sums in the main contractor program to ensure proper accounting for their related works. e. To include in the tender documents and construction contracts only defined Provisional Sums wit to avoid scope conflicts. f. To adopt one of the reliable engineering estimation techniques to estimate the value of Provisional Sums before including them in tender documents and construction contracts. g. To request the bidders to include their attendance rate for each Provisional Sum in the BOQs to avoid the contractual complications. h. To enhance the procedures of subcontracting nominations a relay more on the named subcontracting instead of nominated subcontracting. i. To agree with the bidder about list of approved subcontractors who may undertake the execution of Provisional Sums, this can be happened for example by suggesting 5 subcontractor names for each Provisional Sums and requesting the bidder to choose at least 3 names. j. To train the staff who dealing with Provisional Sums about the contractual frame work on dealing with them and raise the awareness about the best use, benefits and risks of these sums.

7.3.2 Recommendations to FIDIC With regard to the contractual framework, the researcher recommends the following enhancements in any new edition for FIDIC (Red Book) form of contract

a. To clarify the terms and conditions in the case of the increase of contract value due to value adjustment of the Provisional Sums b. To clarify the terms and conditions in the case of the increase of a Provisional Sum value.

69



c. To clarify the obligations and responsibilities of the contracting parties toward the inclusion of Provisional Sum items in the project program.

7.3.3 Recommendations to the UAE statuary authorities As the construction sector is one of the major economic sectors in the UAE, and due the key role which the statuary authorities play in regulating the construction industry, here are some recommendations the research believes can contribute in the sustainability of this sector. a- To connect between granting the project building permit and the satisfactory design completion of all main project components. This would reduce the misuse of Provisional Sums and avoid the scope conflicts in the sites, projects delay and the disputes and conflicts among contracting parties. b- To establish national benchmarking system tracking the market cost in relation to the construction, construction materials and construction supplies. This would provide the professional in the construction industry reliable reference to prepare their estimations and plan their projects according.

7.4

Future Studies

In generally the researcher recommends having further studies to enhance the professional practices in the construction industry in the UAE in general. Although the construction is major sector in the UAE economy there is lack in the studies and researches on the best practices and measures that can be adopted to enhance this sector.

With regards to the research topic, the researcher recommends further studies about the risks and the use improvement of the Provisional Sums in the all other forms of contract which are commonly used in the UAE. In addition, the research believe that there is a real need to study the risks of all other provisions which add uncertainties in the standard forms of contract specially in relation to the Prime Costs and Dry Works.

70



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Ogunsemi, R., (2007). “Predicting the final cost of Construction Projects in Nigeria”, The Quantity Surveyors, 54(4), 3-6.

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Robinson, M., (2013). An Employer’s and Engineer’s Guide to the FIDIC conditions of contract, Oxford: John Wiley & Sons Ltd.

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Online materials -

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-

Construction week, (2013) “Construction to add 11.1% to THE UAE's GDP in 2015”. Construction week (January), [online] available from [9 Nov 2014].

-

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Galadari, (n. d.) “Galadari Advocates & Legal Consultants Charles Ingmire” [online] available from [03 Dec 2014].

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-

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Appendices -

The Survey Invitation The Questionnaire The Questionnaire results The Interview Questions

77




Survey Invitation

Subject: Risk Evaluation for the use of the Provisional Sums in FIDIC (Red Book) Forms of Contract in the UAE Dear Sir/Madam, As you may aware I’m a post graduate student of Heriot-watt University and pursuing MSc in Construction Project Management, and currently carrying out a survey about the risk evaluation for the use of the Provisional Sums in FIDIC (Red Book) Forms of Contract in the UAE

Please help me in making this research worthwhile from your experience in the Industry practices. It won't take more than 10 minutes to complete this questionnaire I would appreciate also if you could please send in your responses by 30th of November 2014. I appreciate if you can also forward the survey to whomever you think close to the topic and can participate in this survey.

Be assured that the information provided shall be used only for academic purpose and as well be treated as highly confidential. The outcomes summary of the research will be shared with you once finalized upon request. https://www.surveymonkey.com/s/CK39M9P Appreciate your help and time

Eng. Ahmad Feras Arar

78


Questionnaire (attached)

79


Risk Evaluation for the use of the Provisional Sums in

*1. What kind of company you are working for? j Real Estate / Developer k l m n j Engineering Consultant k l m n j Contractor k l m n

j Subcontractor k l m n

j Projects Management k l m n j Other k l m n

*2. How many year of experience you have in construction in the UAE ? j 05 k l m n

j 510 k l m n

j 1015 k l m n j 1520 k l m n

j More than 20 k l m n

*3. What is the ranking of you current position? j Junior k l m n

j Senior k l m n

j Manager k l m n

j Senior Manager k l m n j Director k l m n

Other (please specify)

*4. How much are your familiar with the Provisional Sums in the FIDIC forms of

contract?

j Excellent k l m n j Good k l m n

j Somehow k l m n j Poor k l m n

j No idea k l m n

Page 1


*5. What form of contract are you most using?

j FIDIC k l m n

j NEC k l m n j JCT k l m n

j All above k l m n

j None of above k l m n

6. What FIDIC form of contract you most deal with? j FIDIC (Red Book) k l m n

j FIDIC (Green Book) k l m n j FIDIC (White Book) k l m n

j FIDIC (Orange Book) k l m n j FIDIC (Yellow Book) k l m n j FIDIC (Silver Book) k l m n


*7. What FIDIC (Red Book) form of contract you most deal with? j FIDIC (Red Book) 1987, the 4th edition k l m n j FIDIC (Red Book) 1999 k l m n


*8. How often you deal with the FIDIC (Red Book) form of contract attached with

Particular Conditions? j Most of the times k l m n j Sometimes k l m n j Rarely k l m n

j Not at all k l m n

Page 2


*9. From your experience, how often the Provisional Sums are being used in the FIDIC

(Red Book) froms of contract? j in 80 100% of the contracts k l m n j in 60 80% of the contracts k l m n j in 40 60% of the contracts k l m n j in 20 40% of the contracts k l m n

j in less than 20% of the contracts k l m n

*10. From your experience, what is the average value of the Provisional Sums in the

FIDIC based Construction Contracts? j a. 0 10% k l m n j 10 20% k l m n j 20 30% k l m n j 30 40% k l m n j 40 50% k l m n

j More than 50% k l m n

*11. Have you witnessed some Employers including main components of their project

as Provisional Sums i.e. MEP Works, Aluminum & Glazing , Lifts, ID Works?

j Yes k l m n j No k l m n

j I don’t know k l m n

Page 3


*12. Rate the reasons for using the Provisional Sums in the FIDIC (Red Book) forms of

contract?

To have contingency fund

Strongly Disagree

Disagree

j k l m n

j k l m n

j k l m n

Neither Agree nor

Agree

Strongly Agree

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Disagree

for the contract To control the project budget by the Employer To facilities the nominate and appointment of subcontractors To expedite the project tendering and construction commencement To Control the Quality of some important packages to the Employer To subcontract some packages in a design & built kind of arrangement Allow the inclusion of some untraditional packages in the main contract i.e. supply materials, goods, plant and services To limit the scope of main consultant and award some packages to the subcontractors who the Employer trust Allow the inclusion of some works in the tender still under design or their costs unknown at the time of signing the construction contract To include some works in the tender which the consultant able to define their scope Only during the construction

Page 4


*13. Rate the benefits for using the Provisional Sums in the FIDIC (Red Book) form of

contracts ?

Strongly Disagree

Disagree

Save money

j k l m n

j k l m n

Control project cost

j k l m n

Shorten the project

Neither Agree nor

Agree

Strongly Agree

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Disagree

development duration Enhance the quality and value of the project Reduce claims, variations and conflicts Other (please specify)

*14. Is using Provisional Sums in FIDIC (Red Book) form of contract add risk to the

construction contracts?


j I don’t Know k l m n

*15. Who carry the risk more for adding the Provisional Sums in FIDIC form of

contracts? j Employer k l m n j Engineer k l m n

j Contractor k l m n


Page 5

Risk Evaluation for the use of the Provisional Sums in 16. Rate the risks for using the provisional sum items in the FIDIC (Red Book) form of contract

Add cost uncertainty to the

Strongly Disagree

Disagree

j k l m n

j k l m n

j k l m n

Neither Agree nor

Agree

Strongly Agree

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Disagree

contract Increase the final construction cost Expose the contract to the market inflation Delay the construction and project completion Reduce the quality of the works Drive for scope conflicts and miscoordination Drive for claims , variations and conflicts among contracting parties Other (please specify)

*17. Do you think that the use of Provisional Sums in FIDIC (Red Book) form of

contract increased after the economic crisis?



*18. Do you think that the Employer in a signed FIDIC (Red Book) form of contract has

the right to execute a Provisional Sum item either through the main contractor or nominated subcontractor? j Agree k l m n

j Disagree k l m n


*19. Do you think that the Employer in a signed FIDIC (Red Book) form of contract has

the right to increase the value of Provisional Sum item ? j Agree k l m n

j Disagree k l m n


Page 6


*20. Do you think that the Employer in a signed FIDIC (Red Book) from of contract has

the right to add new Provisional Sum item to the construction contract? j Agree k l m n

j Disagree k l m n


*21. Rate the most common navigate effects that can happen to the project due to the

failure of the Provisional Sums in the FIDIC (Red Book) form of contract? Strongly Disagree

Disagree

Project cost increase

j k l m n

j k l m n

Project delay

j k l m n

Poor quality

Neither Agree nor

Agree

Strongly Agree

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Claims and Variations

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Conflicts

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Disagree


*22. Rate the most common reasons of failure of the Provisional Sums in the FIDIC

(Ref Book) form of contract

Strongly Disagree

Disagree

Wrong estimation

j k l m n

j k l m n

Undefined scope

j k l m n

Mismanagement

Neither Agree nor

Agree

Strongly Agree

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Inflation

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Poor coordination

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Contractual complications

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Having main components

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Disagree

as Provisional Sums Other (please specify)

*23. Who carry the responsibility of the Provisional Sums failure in a FIDIC (Red Book)

based construction contract (you can choose more than one option)? c Employer d e f g c Engineer d e f g

c Contractor d e f g

c Nominated subcontractor d e f g


Page 7


*24. In FIDIC (Red BooK) based construction contract, if a Provisional Sum item

subcontracted what is the role of the main contractor? j Supervise the work k l m n

j Coordinate with the subcontractor k l m n

j Administrate the engagement of the subcontractor k l m n j All above k l m n

j None of above k l m n


*25. Do you think that the use of the Provisional Sums should be avoided as much as

possible in the FIDIC (Red Book) from of contract? j Agree k l m n

j Disagree k l m n

j Neither Agree nor Disagree k l m n


*26. Is FIDIC (Red Book) form of contract clear how to deal with Provisional Sums?



*27. Do you think the Provisional Sums in FIDIC (Red Book) form of contract are being

misused by the Employers and consultants?



*28. Is FIDIC (Red Book) form of contract clear about the obligations and

responsibilities of the contracting parties with regard to the Provisional Sums?



Page 8


*29. Rate the possible recommendations to avoid the risk of the use of Provisional

Sums in FIDIC (Red Book) form of Contract

Limit the value of

Strongly Disagree

Disagree

j k l m n

j k l m n

j k l m n

Neither Agree nor

Agree

Strongly Agree

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

j k l m n

Disagree

Provisional Sums in the contract Reduce the number of Provisional Sums in the contract Avoid tendering without having comprehensive and clear scope for all Provisional Sum items Avoid the inclusion of any of the main components of the project as Provisional Sum Improve the Provisional Sums clauses by adding particular conditions detail out the obligation and responsibilities of each party Education and training for the staff on dealing with Provisional Sums Introduce list of approved subcontractor who can undertake the Provisional Sums execution Incorporating the execution of Provisional Sums in the project program Allowing the bidders to price the Provisional Sums items Other (please specify)

*30. Do you agree that in order to limit the risks of Provisional Sums in the FIDIC (Red

Book) from of contract the value should not exceed certain percentage form the overall value of the contract?



Page 9

Risk Evaluation for the use of the Provisional Sums in 31. if " Yes" , what is the percentage which the Provisional Sums value not exceed ? j 0 10% k l m n

j 10 20% k l m n j 20 30% k l m n j 30 40% k l m n j 40 50% k l m n

j 50% or more k l m n

*32. Do you think having some of the main components of the project as Provisional

Sums such as MEP Works, Aluminum & Glazing , Lifts , ID Works is risky and should be avoided?



33. Do you have any comment about the research topic that you would like to add? and would you like to provide any recommendation to improve the use of the provisional Sums in FIDIC (Red Book) based contracts in UAE? 5 6

Page 10


Questionnaire results (attached)

80


Risk Evaluation for the use of the Provisional Sums in FIDIC (Red Book) Form of Contract in the UAE

SurveyMonkey

Q1 What kind of company you are working for? Answered: 60

Skipped: 0

50% 40%

33.33%

30%

20%

23.33% 15.00%

15.00% 10.00%

10%

3.33%

0% Real Estate / Developer

Engineering Consultant

Contractor

Answer Choices

Subcontrac tor

Projects Management

Other

Responses

Real Estate / Developer

15.00%

9

Engineering Consultant

33.33%

20

Contractor

23.33%

14

Sub-contractor

15.00%

9

Projects Management

10.00%

6

Other

3.33%

2

Total

60

1 / 33


SurveyMonkey

Q2 How many year of experience you have in construction in the UAE ? Answered: 60

Skipped: 0

50%

40%

33.33%

31.67%

30%

20%

16.67% 10.00%

8.33%

10%

0% 0-5

5-10

10-15

Answer Choices

15-20

More than 20

Responses

0-5

16.67%

10

5-10

31.67%

19

10-15

33.33%

20

15-20

10.00%

6

More than 20

8.33%

5

Total

60

2 / 33


SurveyMonkey

Q3 What is the ranking of you current position? Answered: 60

Skipped: 0

50%

35.00%

40%

31.67%

30%

15.00%

20%

10.00%

8.33%

10%

0% Junior

Senior

Manager

Answer Choices

Senior Manager

Director

Responses

Junior

10.00%

6

Senior

35.00%

21

Manager

31.67%

19

Senior Manager

15.00%

9

Director

8.33%

5

Total

60

3 / 33


SurveyMonkey

Q4 How much are your familiar with the Provisional Sums in the FIDIC forms of contract? Answered: 60 80%

Skipped: 0

66.67%

70% 60% 50% 40% 30%

25.00%

20%

6.67% 1.67%

10% 0% Excellent

Good

Somehow

Answer Choices

Poor

No idea

Responses

Excellent

25.00%

15

Good

66.67%

40

Somehow

6.67%

4

Poor

1.67%

1

No idea

0.00%

0

Total

60

4 / 33


SurveyMonkey

Q5 What form of contract are you most using? Answered: 60

Skipped: 0

100%

80%

91.67%

60%

40%

20%

6.67%

1.67%

0% FIDIC

NEC

JCT

Answer Choices

All above

None of above

Responses

FIDIC

91.67%

55

NEC

0.00%

0

JCT

0.00%

0

All above

6.67%

4

None of above

1.67%

1

Total

60

5 / 33


SurveyMonkey

Q6 What FIDIC form of contract you most deal with? Answered: 58

Skipped: 2

100% 80%

93.10%

60%

40%

20%

5.17%

1.72% 0% FIDIC (Red Book)

FIDIC (Green Book)

FIDIC (White Book)

Answer Choices

FIDIC (Orange Book)

FIDIC (Yellow Book)

FIDIC (Silver Book)

Responses

FIDIC (Red Book)

93.10%

54

FIDIC (Green Book)

0.00%

0

FIDIC (White Book)

1.72%

1

FIDIC (Orange Book)

0.00%

0

FIDIC (Yellow Book)

5.17%

3

FIDIC (Silver Book)

0.00%

0

Total

58

6 / 33


SurveyMonkey

Q7 What FIDIC (Red Book) form of contract you most deal with? Answered: 60

Skipped: 0

100% 80%

60%

50.00%

50.00%

FIDIC (Red Book) 1987, the 4th edition

FIDIC (Red Book) 1999

40%

20%

0%

Answer Choices

Responses

FIDIC (Red Book) 1987, the 4th edition

50.00%

30

FIDIC (Red Book) 1999

50.00%

30

Total

60

7 / 33


SurveyMonkey

Q8 How often you deal with the FIDIC (Red Book) form of contract attached with Particular Conditions? Answered: 60

Skipped: 0

100%

80%

61.67% 60%

33.33%

40%

20%

3.33%

1.67%

Rarely

Not at all

0% Most of the times

Sometimes

Answer Choices

Responses

Most of the times

61.67%

37

Sometimes

33.33%

20

Rarely

3.33%

2

Not at all

1.67%

1

Total

60

8 / 33


SurveyMonkey

Q9 From your experience, how often the Provisional Sums are being used in the FIDIC (Red Book) froms of contract? Answered: 55

Skipped: 5

100% 80%

72.73%

60%

40%

23.64%

20%

3.64%

0% in 80- 100% of the contracts

in 60 - 80% of the contracts


Answer Choices


in less than 20% of the contracts

Responses

in 80- 100% of the contracts

72.73%

40


23.64%

13


3.64%

2


0.00%

0

in less than 20% of the contracts

0.00%

0

Total

55

9 / 33


SurveyMonkey

Q10 From your experience, what is the average value of the Provisional Sums in the FIDIC based Construction Contracts? Answered: 55

Skipped: 5

70% 60% 50%

38.18%

40%

34.55%

30% 20% 10%

10.91%

14.55%

1.82%

0% a. 0- 10%

10- 20%

20- 30%

Answer Choices

30- 40%

40- 50%

More than 50%

Responses

a. 0- 10%

1.82%

1

10- 20%

10.91%

6

20- 30%

14.55%

8

30- 40%

38.18%

21

40- 50%

34.55%

19

More than 50%

0.00%

0

Total

55

10 / 33


SurveyMonkey

Q11 Have you witnessed some Employers including main components of their project as Provisional Sums i.e. MEP Works, Aluminum & Glazing , Lifts, ID Works? Answered: 55

Skipped: 5

100%

96.36% 80%

60%

40%

20%

1.82%

1.82%

No

I don’t know

0% Yes

Answer Choices

Responses

Yes

96.36%

53

No

1.82%

1

I don’t know

1.82%

1

Total

55

11 / 33


SurveyMonkey

Q12 Rate the reasons for using the Provisional Sums in the FIDIC (Red Book) forms of contract? Answered: 55

Skipped: 5

70% 60% 50% 40% 30% 20% 10% 0% Allow the inclus ion...

To facili ties the...

Allow the inclus ion...

Strongly Disagree

To includ e some wor...

To subcon tract som...

Disagree

To expedi te the pro...

To Contro l the Qua...

To limit the sco...

Neither Agree nor Disagree

To have contin gen...

To contro l the pro...

Any other reason (s)...

Agree

Strongly Agree

Strongly Disagree

Disagree

Total

Average Rating

Allow the inclusion of some un-traditional packages in the main contract i.e. supply materials, goods, plant and services

3.64% 2.00

7.27% 4.00

5.45% 3.00

25.45% 14.00

58.18% 32.00

55

4.27

To facilities the nominate and appointment of subcontractors

1.82% 1.00

3.64% 2.00

7.27% 4.00

45.45% 25.00

41.82% 23.00

55

4.22

Allow the inclusion of some works in the tender still under design or their costs unknown at the time of signing the construction contract

1.85% 1.00

1.85% 1.00

18.52% 10.00

27.78% 15.00

50.00% 27.00

54

4.22

To include some works in the tender which the consultant able to define their scope Only during the construction

1.85% 1.00

1.85% 1.00

18.52% 10.00

35.19% 19.00

42.59% 23.00

54

4.15

To subcontract some packages in a design & built kind of arrangement

3.64% 2.00

9.09% 5.00

9.09% 5.00

27.27% 15.00

50.91% 28.00

55

4.13

To expedite the project tendering and construction commencement

3.64% 2.00

9.09% 5.00

10.91% 6.00

29.09% 16.00

47.27% 26.00

55

4.07

To Control the Quality of some important packages to the Employer

5.45% 3.00

12.73% 7.00

16.36% 9.00

30.91% 17.00

34.55% 19.00

55

3.76

To limit the scope of main consultant and award some packages to the subcontractors who the Employer trust

10.91% 6.00

10.91% 6.00

23.64% 13.00

23.64% 13.00

30.91% 17.00

55

3.53

To have contingency fund for the contract

16.36% 9.00

20.00% 11.00

25.45% 14.00

30.91% 17.00

7.27% 4.00

55

2.93

14.55% 8.00

23.64% 13.00

29.09% 16.00

29.09% 16.00

3.64% 2.00

55

2.84

0.00% 0.00

0.00% 0.00

0.00% 0.00

0.00% 0.00

0.00% 0.00

0

0.00

To control the project budget by the Employer

Any other reason(s), please specify

12 / 33


Agree

Strongly Agree


SurveyMonkey

Q13 Rate the benefits for using the Provisional Sums in the FIDIC (Red Book) form of contracts ? Answered: 55

Skipped: 5

50% 40%

30%

20%

10%

0% Shorten the project development duration

Enhance the quality and value of the project

Strongly Disagree

Save money

Disagree



Reduce claims, variations and conflicts

Agree

Strongly Agree

Strongly Disagree

Disagree


Agree

Strongly Agree

Total

Average Rating

Shorten the project development duration

3.64% 2.00

12.73% 7.00

23.64% 13.00

38.18% 21.00

21.82% 12.00

55

3.62

Enhance the quality and value of the project

3.64% 2.00

16.36% 9.00

20.00% 11.00

38.18% 21.00

21.82% 12.00

55

3.58

10.91% 6.00

20.00% 11.00

25.45% 14.00

38.18% 21.00

5.45% 3.00

55

3.07

10.91% 6.00

23.64% 13.00

25.45% 14.00

30.91% 17.00

9.09% 5.00

55

3.04

18.18% 10.00

23.64% 13.00

21.82% 12.00

23.64% 13.00

12.73% 7.00

55

2.89

Save money


Reduce claims, variations and conflicts

13 / 33


SurveyMonkey

Q14 Is using Provisional Sums in FIDIC (Red Book) form of contract add risk to the construction contracts? Answered: 55

Skipped: 5

100%

81.82% 80%

60%

40%

14.55%

20%

3.64%

0% Yes

No

Answer Choices

I don’t Know

Responses

Yes

81.82%

45

No

14.55%

8

I don’t Know

3.64%

2

Total

55

14 / 33


SurveyMonkey

Q15 Who carry the risk more for adding the Provisional Sums in FIDIC form of contracts? Answered: 55

Skipped: 5

100%

80.00% 80%

60%

40%

20.00% 20%

0% Employer

Engineer

Answer Choices

Contractor

Responses

Employer

80.00%

44

Engineer

0.00%

0

Contractor

20.00%

11

Total

55

15 / 33


SurveyMonkey

Q16 Rate the risks for using the provisional sum items in the FIDIC (Red Book) form of contract Answered: 55

Skipped: 5

Drive for scope conflicts and...

Increase the final construct ion cost

70% 60% 50% 40% 30% 20% 10% 0% Drive for claims , variat...

Add cost uncertain ty to the contract

Strongly Disagree

Disagree

Expose the contract to the...

Delay the construct ion an...


Reduce the quality of the...

Agree

Strongly Agree

Strongly Disagree

Disagree


Agree

Strongly Agree

Total

Average Rating

Drive for claims , variations and conflicts among contracting parties

7.27% 4.00

5.45% 3.00

10.91% 6.00

40.00% 22.00

36.36% 20.00

55

3.93

Add cost uncertainty to the contract

0.00% 0.00

9.09% 5.00

14.55% 8.00

63.64% 35.00

12.73% 7.00

55

3.80

3.64% 2.00

14.55% 8.00

16.36% 9.00

43.64% 24.00

21.82% 12.00

55

3.65

3.64% 2.00

5.45% 3.00

36.36% 20.00

40.00% 22.00

14.55% 8.00

55

3.56

5.56% 3.00

3.70% 2.00

35.19% 19.00

42.59% 23.00

12.96% 7.00

54

3.54

9.09% 5.00

21.82% 12.00

21.82% 12.00

32.73% 18.00

14.55% 8.00

55

3.22

21.82% 12.00

32.73% 18.00

16.36% 9.00

16.36% 9.00

12.73% 7.00

55

2.65

Drive for scope conflicts and mis-coordination

Increase the final construction cost

Expose the contract to the market inflation

Delay the construction and project completion

Reduce the quality of the works

16 / 33


SurveyMonkey

Q17 Do you think that the use of Provisional Sums in FIDIC (Red Book) form of contract increased after the economic crisis? Answered: 55

Skipped: 5

100%

80%

58.18% 60%

40%

25.45% 16.36%

20%

0% Yes

No

Answer Choices

I don’t Know

Responses

Yes

58.18%

32

No

16.36%

9

I don’t Know

25.45%

14

Total

55

17 / 33


SurveyMonkey

Q18 Do you think that the Employer in a signed FIDIC (Red Book) form of contract has the right to execute a Provisional Sum item either through the main contractor or nominated subcontractor? Answered: 55

Skipped: 5

100%

80.00% 80%

60%

40%

14.55%

20%

5.45%

0% Agree

Disagree

Answer Choices

I don’t Know

Responses

Agree

80.00%

44

Disagree

14.55%

8

I don’t Know

5.45%

3

Total

55

18 / 33


SurveyMonkey

Q19 Do you think that the Employer in a signed FIDIC (Red Book) form of contract has the right to increase the value of Provisional Sum item ? Answered: 55

Skipped: 5

100%

81.82% 80%

60%

40%

16.36% 20%

1.82% 0% Agree

Disagree

Answer Choices

I don’t Know

Responses

Agree

81.82%

45

Disagree

16.36%

9

I don’t Know

1.82%

1

Total

55

19 / 33


SurveyMonkey

Q20 Do you think that the Employer in a signed FIDIC (Red Book) from of contract has the right to add new Provisional Sum item to the construction contract? Answered: 55

Skipped: 5

100%

80%

60.00% 60%

32.73%

40%

20%

7.27%

0% Agree

Disagree

Answer Choices

I don’t Know

Responses

Agree

60.00%

33

Disagree

32.73%

18

I don’t Know

7.27%

4

Total

55

20 / 33


SurveyMonkey

Q21 Rate the most common navigate effects that can happen to the project due to the failure of the Provisional Sums in the FIDIC (Red Book) form of contract? Answered: 55

Skipped: 5

80% 70% 60% 50% 40% 30% 20% 10% 0% Claims and Variations

Conflicts

Strongly Disagree


Disagree

Project delay


Poor quality

Agree

Strongly Agree

Strongly Disagree

Disagree


Agree

Strongly Agree

Total

Average Rating

Claims and Variations

0.00% 0.00

7.27% 4.00

14.55% 8.00

52.73% 29.00

25.45% 14.00

55

3.96

Conflicts

5.45% 3.00

7.27% 4.00

14.55% 8.00

45.45% 25.00

27.27% 15.00

55

3.82

3.64% 2.00

3.64% 2.00

16.36% 9.00

67.27% 37.00

9.09% 5.00

55

3.75

3.64% 2.00

9.09% 5.00

14.55% 8.00

60.00% 33.00

12.73% 7.00

55

3.69

25.45% 14.00

34.55% 19.00

18.18% 10.00

14.55% 8.00

7.27% 4.00

55

2.44


Project delay

Poor quality

21 / 33


SurveyMonkey

Q22 Rate the most common reasons of failure of the Provisional Sums in the FIDIC (Ref Book) form of contract Answered: 55

Skipped: 5

80% 70% 60% 50% 40% 30% 20% 10% 0% Undefined scope

Having main component s as...

Strongly Disagree

Wrong estimatio n

Poor coordinat ion

Disagree

Contractu al complicat ions

Mismanag ement


Inflation

Agree

Strongly Agree

Strongly Disagree Undefined scope

Disagree


Agree

Strongly Agree

Total

Average Rating

0.00% 0.00

5.56% 3.00

1.85% 1.00

70.37% 38.00

22.22% 12.00

54

4.09

Having main components as Provisional Sums

1.85% 1.00

7.41% 4.00

11.11% 6.00

42.59% 23.00

37.04% 20.00

54

4.06

Wrong estimation

0.00% 0.00

9.09% 5.00

5.45% 3.00

65.45% 36.00

20.00% 11.00

55

3.96

3.64% 2.00

9.09% 5.00

14.55% 8.00

45.45% 25.00

27.27% 15.00

55

3.84

7.27% 4.00

16.36% 9.00

23.64% 13.00

40.00% 22.00

12.73% 7.00

55

3.35

5.45% 3.00

14.55% 8.00

40.00% 22.00

25.45% 14.00

14.55% 8.00

55

3.29

7.27% 4.00

18.18% 10.00

49.09% 27.00

18.18% 10.00

7.27% 4.00

55

3.00

Poor coordination

Contractual complications

Mis-management

Inflation

22 / 33


SurveyMonkey

Q23 Who carry the responsibility of the Provisional Sums failure in a FIDIC (Red Book) based construction contract (you can choose more than one option)? Answered: 55

Skipped: 5

100%

80.00% 80%

54.55%

60%

30.91%

40%

10.91%

20%

0% Employer

Engineer

Answer Choices

Contractor

Nominated subcontractor

Responses

Employer

80.00%

44

Engineer

54.55%

30

Contractor

30.91%

17

Nominated subcontractor

10.91%

6

Total Respondents: 55

23 / 33


SurveyMonkey

Q24 In FIDIC (Red BooK) based construction contract, if a Provisional Sum item subcontracted what is the role of the main contractor? Answered: 55

Skipped: 5

100%

76.36% 80%

60%

40%

20%

7.27%

5.45%

7.27%

Supervise the work

Coordinate with the subcontract or

Administrat e the engagement of the...

1.82%

1.82%

None of above

I don’t know

0%

Answer Choices

All above

Responses

Supervise the work

7.27%

4

Coordinate with the subcontractor

5.45%

3

Administrate the engagement of the subcontractor

7.27%

4

All above

76.36%

42

None of above

1.82%

1

I don’t know

1.82%

1

Total

55

24 / 33


SurveyMonkey

Q25 Do you think that the use of the Provisional Sums should be avoided as much as possible in the FIDIC (Red Book) from of contract? Answered: 53

Skipped: 7

100% 80%

62.26%

60%

40%

22.64% 15.09%

20%

0% Agree

Disagree

Answer Choices


I don’t know

Responses

Agree

62.26%

33

Disagree

22.64%

12


15.09%

8

I don’t know

0.00%

0

Total

53

25 / 33


SurveyMonkey

Q26 Is FIDIC (Red Book) form of contract clear how to deal with Provisional Sums? Answered: 53

Skipped: 7

100%

80%

66.04%

60%

40%

28.30%

20%

5.66%

0% Yes

No

Answer Choices

I don’t Know

Responses

Yes

66.04%

35

No

28.30%

15

I don’t Know

5.66%

3

Total

53

26 / 33


SurveyMonkey

Q27 Do you think the Provisional Sums in FIDIC (Red Book) form of contract are being misused by the Employers and consultants? Answered: 53

Skipped: 7

100%

80%

71.70%

60%

40%

24.53%

20%

3.77%

0% Yes

No

Answer Choices

I don’t Know

Responses

Yes

71.70%

38

No

24.53%

13

I don’t Know

3.77%

2

Total

53

27 / 33


SurveyMonkey

Q28 Is FIDIC (Red Book) form of contract clear about the obligations and responsibilities of the contracting parties with regard to the Provisional Sums? Answered: 53

Skipped: 7

100%

80%

60%

49.06% 41.51%

40%

9.43%

20%

0% Yes

No

Answer Choices

I don’t Know

Responses

Yes

49.06%

26

No

41.51%

22

I don’t Know

9.43%

5

Total

53

28 / 33


SurveyMonkey

Q29 Rate the possible recommendations to avoid the risk of the use of Provisional Sums in FIDIC (Red Book) form of Contract Answered: 53

Skipped: 7

60% 50% 40% 30% 20% 10% 0% Avoid tenderi ng with...

Incorpo rating the exec...

Limit the value of...

Strongly Disagree

Educati on and trainin g fo...

Introdu ce list of appr...

Disagree

Allowin g the bidders to...

Avoid the inclusi on o...


Reduce the number of...

Improve the Provisi onal...

Agree

Strongly Agree

Strongly Disagree

Disagree

Avoid tendering without having comprehensive and clear scope for all Provisional Sum items

1.89% 1.00

5.66% 3.00

5.66% 3.00

35.85% 19.00

Incorporating the execution of Provisional Sums in the project program

1.89% 1.00

3.77% 2.00

24.53% 13.00

Limit the value of Provisional Sums in the contract

3.77% 2.00

7.55% 4.00

Education and training for the staff on dealing with Provisional Sums

5.66% 3.00

Introduce list of approved subcontractor who can undertake the Provisional Sums execution Allowing the bidders to price the Provisional Sums items

Avoid the inclusion of any of the main components of the project as Provisional Sum Reduce the number of Provisional Sums in the contract

Improve the Provisional Sums clauses by adding particular conditions detail out the obligation and responsibilities of each party

Total

Average Rating

50.94% 27.00

53

4.28

33.96% 18.00

35.85% 19.00

53

3.98

11.32% 6.00

47.17% 25.00

30.19% 16.00

53

3.92

1.89% 1.00

30.19% 16.00

24.53% 13.00

37.74% 20.00

53

3.87

5.66% 3.00

5.66% 3.00

26.42% 14.00

26.42% 14.00

35.85% 19.00

53

3.81

9.43% 5.00

5.66% 3.00

20.75% 11.00

35.85% 19.00

28.30% 15.00

53

3.68

15.38% 8.00

13.46% 7.00

5.77% 3.00

21.15% 11.00

44.23% 23.00

52

3.65

5.66% 3.00

15.09% 8.00

24.53% 13.00

45.28% 24.00

9.43% 5.00

53

3.38

18.87% 10.00

11.32% 6.00

15.09% 8.00

22.64% 12.00

32.08% 17.00

53

3.38

29 / 33


Agree

Strongly Agree


SurveyMonkey

Q30 Do you agree that in order to limit the risks of Provisional Sums in the FIDIC (Red Book) from of contract the value should not exceed certain percentage form the overall value of the contract? Answered: 53

Skipped: 7

100%

80%

67.92%

60%

40%

28.30%

20%

3.77%

0% Yes

No

Answer Choices

I don’t Know

Responses

Yes

67.92%

36

No

28.30%

15

I don’t Know

3.77%

2

Total

53

30 / 33


SurveyMonkey

Q31 if " Yes" , what is the percentage which the Provisional Sums value not exceed ? Answered: 40

Skipped: 20

100% 80%

60%

40%

42.50% 27.50% 17.50%

20%

7.50%

5.00%

30- 40%

40- 50%

0% 0- 10%

10- 20%

20- 30%

Answer Choices

50% or more

Responses

0- 10%

27.50%

11

10- 20%

42.50%

17

20- 30%

17.50%

7

30- 40%

7.50%

3

40- 50%

5.00%

2

50% or more

0.00%

0

Total

40

31 / 33


SurveyMonkey

Q32 Do you think having some of the main components of the project as Provisional Sums such as MEP Works, Aluminum & Glazing , Lifts , ID Works is risky and should be avoided? Answered: 53

Skipped: 7

100%

80%

62.26% 60%

40%

22.64% 15.09%

20%

0% Yes

No

Answer Choices

I don’t know

Responses

Yes

62.26%

33

No

22.64%

12

I don’t know

15.09%

8

Total

53

32 / 33


Q33 Do you have any comment about the research topic that you would like to add? and would you like to provide any recommendation to improve the use of the provisional Sums in FIDIC (Red Book) based contracts in UAE? Answered: 4

Skipped: 56

33 / 33

SurveyMonkey



Interview Questions

1- Please introduce yourself (years of experience in UAE, kind of company that you are working for, position)

2- How much you are familiar with the FIDIC forms of contract in general and the Red Book in particular? 3- From your experience, how often the Provisional Sums are being used in the UAE construction industry, what is the average percentage of these Sums usually to the value of construction contract? Are they being used for some main components of the project such as Aluminum and glazing, MEP works, ID works?

4- What are the reasons and benefits for using Provisional Sums in the FIDIC (Red Book) forms of contract?

5- What is the recommended percentage of Provisional Sums should be from the overall value of the main construction contract? Do you think exceeding this percentage can carry more risk for one of the contracting parties and why?

6- What are the risks for using the Provisional Sums in the FIDIC (Red Book) forms of contract?

7- What are the common failures for using the Provisional Sums in the FIDIC (Red Book) forms of contract? What is the reason you think for these failures?

8- How the values of the Provisional Sums are usually estimated in the main construction contract? 9- What is the practice to execute the Provisional Sums in the FIDIC (Red Book) forms of contract?

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10- Do you think that the use of the Provisional Sums in the FIDIC (Red Book) forms of contract has been misused? 11- How much FIDIC (Red Book) forms of contract clear on the way to deal with the Provisional Sums and their related matters (execution, subcontractor nomination, payment, dispute, program, cost …etc) 12- Do you think the use of Provisional Sums should be avoided? What is the maximum percentage that you suggest for their overall value to avoid major risks? 13- What are your recommendations to avoid the Provisional Sum risks in FIDIC (Red Book) from of contract?

14- Do you have any additional comment?

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Risk Evaluation for the use of the Provisional Sums in FIDIC (Red Book) Forms of Contract in the UAE

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