
What is the difference between a Provisional Sum and a PC Sum?
This is a common question frequently asked and often misinterpreted in the construction industry. We understand the confusion, as both are used to provide estimates for different purposes. For example, kitchen appliances or tiles may not be listed in the schedule of finishes, or the scope of works may not be crystal clear.
In the event that a schedule of finishes hasn’t been provided, we would typically see a Prime Cost Sum (PC Sum) for tiling. Similarly, if the contractor has not received landscaping drawings, we are more likely to see a Provisional Sum included, or the landscaping trade excluded entirely from the contract sum.
The benefit of having, say a $100/m² PC Sum for floor tiles is that it allows clients to select a floor tile within that budget, while having the labour component associated with the installation included elsewhere in the construction budget as a fixed cost. However, a Provisional Sum for landscaping would include both labour and materials.
This doesn’t necessarily mean that a variation won’t be raised in the event of a cost overrun associated with a PC Sum or Provisional Sum. If the developer purchases a floor tile for the exact value of the PC Sum, a variation is highly unlikely to be raised. However, if a larger floor tile is selected, which may take the tiling subcontractor longer to install, a variation may be raised by the builder. For this reason, it’s important for the builder to describe and specify exactly what product and size they have assumed, in order to prevent any disputes or cost overruns down the line.
In the event a variation is raised, for concise bookkeeping, we prefer contractors to claim 100% of the PC Sum and then credit the amount in full as a variation, which will then reconcile with the amount claimed. The revised value can then be claimed within the variation register, including any margin on the difference. In our opinion, all Provisional and Prime Cost Sums should be treated as variations.
To summarise, the main difference is that a Provisional Sum includes both labour and materials, whereas a Prime Cost Sum will include the material only, with the labour component included as a fixed price elsewhere. It is essential to confirm with the contractor in writing that they have made sufficient allowance for installation elsewhere within the construction budget.
What to look for when reviewing Provisional and Prime Cost Sums?
When comparing tenders, we recommend ensuring all Provisional and PC Sums are clearly described and estimated. On occasion, we have found that some contractors may reduce the cost of these sums to appear more competitive when pricing, only to cost the developer dearly down the line. Overall, we recommend limiting the value of these allowances within the construction contract to less than 10%, where possible, as these sums are not fixed and are subject to change based on the final proposed works.
Elemental Quantity Surveyors are located in Christchurch, New Zealand. Feel free to contact us at info@elementalqs.co.nz for a complimentary fee proposal. We specialise in Feasibility Reports, Construction Cost Estimates, Cost Planning, Contract Administration, Bank Reporting, Progress Certificates, Variation Assessments, Reinstatement Cost Assessments, and Upfront Embodied Carbon.
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