Confused about these building industry acronyms? Prime Cost (PC) items and Provisional Sums (PS) are two items in a standard building contract which cause confusion. Most building contracts are called “Fixed Price Contracts”, but the final contract sum can vary due to fluctuations in PC and PS items. We’ll endeavour to explain why and how to minimise if not avoid entirely.
Let’s take a closer look.
They’re both allowances in the building budget.
Prime Cost Items
A PC Item or Prime Cost Item is an allowance to supply items or materials such as toilets, vanity, tapware, shower screens etc where the final selection hasn’t been made. The labour cost for installation will be calculated separately and the Prime cost must be realistic.
Provisional Sum Allowances
Provisional Sum allowances are used for an unknown cost and covers both materials and labour. PS allowances are often used for excavation where the exact costs are not known, and for kitchens whereby the allowance includes the cabinetry, benchtops and labour for installation. They are educated estimates and they must be reasonably accurate.
Both of these allowances will increase if you choose items more expensive than the budgeted range, or if you increase the scope of your project. So before you fall in love with top of the range tiles, bathroom fittings, or intricate cabinetry… check what standard or range you have agreed on. Choose a more expensive item, this becomes a variation.
Likewise, if you decide to tile all bathroom walls rather than one, this will become a variation.
While PC and PS items allow the contract to be flexible, we always recommend choosing as much as possible early on to stay on top of your budget. If you want top of the range it’s best to work this out early on.
The more Provisional Sums in the contract, the higher the chance of cost variations even when signing a fixed price contract.
And because these allowances make a contract flexible, be concerned if you are presented with a specifications list or contract that includes more than two Provisional Sums. There simply shouldn’t be under a normal building situation. Be even more concerned if the quote was the cheapest. Not just lazy quoting, this should be a warning bell…what might start as a ‘cheapest price’ will more than likely cost considerably more because you’ll be faced with cost variations. Most often the cheapest price is not what it seems.
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