The difference between a Prime Cost (PC) and Provisional Sum (PS) item?
Construction contracts often contain many technical terms that can be confusing for those who are not familiar with the industry. Two of these terms that are often used interchangeably are Prime Cost (PC) and Provisional Sum (PS) items. While both terms relate to costs that are not yet defined in the contract, there are some differences between them that are important to understand.
Prime Cost
A Prime Cost item refers to a specific product or material that has not been specified or chosen by the client at the time when the contract is signed. Therefore, an allowance needs to be included in the contract sum. This means that the client will need to select the product or material, and the builder will adjust the actual cost of the product or material plus a markup percentage. The builder will usually provide the client with a list of potential products or materials to choose from, which will vary in price depending on their quality and specifications. Once the client makes their selection, the builder will update the PC schedule with the actual cost of the chosen product or material.
Examples of a Prime Cost
Examples of items that could be a Prime Cost include specific finishes, such as tiles, carpets, or light fixtures. A PC item is fixture or fitting and never includes any services or labour for installation. The client may not have made a final decision on these items at the time the contract is signed, but they are necessary for the completion of the project.
Provisional Sum
On the other hand, a Provisional Sum item is an allowance that is included in the contract sum for a specific scope of work that has not yet been defined. This means that the builder will need to estimate the cost of the work, and the client will pay the estimated amount. If the actual cost of the work exceeds the estimated amount, the client will need to pay the difference. If the actual cost is less than the estimated amount, the client will receive a credit. Provisional Sum items are often used for work that is complex or difficult to define at the time when the contract is signed, such as site preparation or excavation work.
Examples of a Provisional Sum
Examples of items that could be a Provisional Sum include site preparation or excavation work, as the exact scope of this work may not be known at the time the contract is signed and can vary depending on the specific site conditions. Additionally, items such as demolition work or remediation work may also be included as Provisional Sum items. These items can be difficult to estimate accurately, and the actual cost may depend on factors that are not known at the time when the contract is signed. Builders also often put in a provisional sum for things like Electrical or Air Conditioning as these are generally items which have a varied scope of works, especially in home renovations.
In summary, the main difference between a Prime Cost item and a Provisional Sum item is that a Prime Cost item is a specific product or material, while a Provisional Sum item is an allowance for a specific scope of work that has not yet been defined. Both types of items can be used to ensure that the contract adequately reflects the scope of work and associated costs.
It is important for clients and builders to understand these terms to avoid confusion and ensure that the contract accurately reflects the costs and scope of work. Failure to understand these terms may result in disputes and delays in the construction process. Therefore, clients and builders should work closely together to ensure that all costs and work requirements are clearly defined in the contract.