Prime Cost (or PC) items & Provisional Sums (or PS) are generally found within building contracts used by building companies all over NSW.
Kirribilli Homes is a renovation specialist building company. We use HIA contracts. These may be known as being “industry standard.” Another contract often used is the MBA contract which also may be known as being “industry standard.”
On page 8 of the HIA “NSW Residential Building Contract for Renovations & Additions” (Edition 5a) the page is titled “Schedule 7. Prime Cost and Provisional Sum Items” (Clause 20.) Then the page allows for details of both Prime Cost Items and their allowance cost as well as Provisional Sum Items and their allowance cost.
Logically both PC items and PS items have common ground in that they are attributed as having non-fixed pricing or what the industry calls allowance pricing for some items within the Scope of Works.
Often there is confusion about PC items and PS items. So we hope to bring you some clarity here in plain English especially since a final contract price may vary due to changes in PC and PS item costs. Some contracts generally referred to as “fixed price contracts” can still include PC and PS items with allowances given.
A PC item may be bathroom tiles, kitchen taps, flickmixers, shower heads, doors, vanities or even lighting. A cost has been attributed to the PC item/s to purchase the item/s specified. The agreed estimate price is included at contract signing to cover the cost of purchasing. These items are not fixed in price because they are not selected yet. We could say that these items are “subject to final selection by client” for example.
According to the Home Building Contracts Act (1991) a builder must estimate the cost of these items at or above the lowest amount these items could reasonably cost, which thereby and arguably provides good stewardship of the client.
For example a vanity may be listed as a PC item within the builders quotation and contract with an allowance of $500 but the client shops the item and selects a beautiful vanity which can be purchased at a price of $1,200. The building company must now raise a variation for the item which covers the additional $700 at the client’s expense. If the cost of the PC item changes from the allowance, then the final contract price changes as well.
A provisional sum (PS) carries a monetary allowance to cover labour or materials or both where the full extent of this item cannot be fully determined specifically at the contract stage. It may be that this particular work may need to be commenced and underway to understand the complexity of the work, the depth of the work or the accuracy of the work. It may be that unforeseen elements can only be revealed during the project.
For example the installation of a large bi-fold door may be overseen by a structural engineer and listed as a provisional sum item covering both the purchase of the door and labour. The variables within this renovation item would include the relative wall strength and integrity of the structural timbers revealed once the Gyprock sheeting is removed exposing more fully the relative installation area. The structural engineer is responsible for the tensile strength and would typically wish to revisit the site once building work has commenced. Other variables would include flashing and the best use of sills such as tiled sills and brick sills. These are best chosen after the bi-fold unit is installed. Therefore the bi-fold installation is listed as a provisional sum in the best interests of providing a quality job.
Changes in the install equate to changes to the final contract amount.
Discussion with Kirribilli Homes means that clients are able to plan well for such contingencies. Some pre-shopping for PC items can be done online to the supplier network to get a “feel” for more “accurate” PC item pricing with final selection done in-store at the convenient time. Overruns in pricing is undesirable for both parties (client as well as builder) particularly where the company such as Kirribilli Homes is desirous of a good reputation and the propensity to be referred well to others.
More often than not it is the “cheap quotation” with minimal allowances for PC and PS items that red flag the client and suggest that the builder or renovation company are being “strategic” with their pricing to win the project.
Hoping the above assists in bringing clarity to the area of understanding prime cost items and provisional sums on builder’s contracts.
To discuss your renovation plans with Kirribilli Homes, contact Michael Hunnam directly on
0416 621 945