Provisional sums (PS) and prime cost allowances are used where the owner has not yet made their selections such as tiles, carpet and tap-ware but want an amount included in the contract. Put simply, it’s a spending allowance for that particular item.
A prime cost (PC) item is a dollar figure allowance used in building quotes and contracts for materials such as appliances, sinks, taps etc where the final selection of those items has not yet been confirmed. The allowance for a PC item covers only the supply of that item – any labour associated with the installation of that item should either be included in the contract, or listed as a provisional sum.
PC items do change depending on your final selection and therefore can incur additional costs, so in order to minimise your exposure to budget overruns, make your selection choices prior to signing a contract where possible.
A provisional sum (PS) is an allowance that the builder has made to complete a task under the contract and can cover labour only, or labour and materials.
PS’s are useful when the final selections have not been completed or it's simply not possible to include in a quote due to factors that are unknown at the time of the contract signing. As with PC’s, they are estimates, which means they can change when the final cost of the tasks is calculated.
When building a prestige custom home, PS’s can be inevitable due to the nature of the design and your inclusions. That said, be wary of a building contract full of PS’s as you could find your contract price increasing dramatically throughout the build. It is a big red flag and you carry the risk if the PS’s are unrealistically low, after all, final costs will be passed directly on to you. If your builder is experienced and has reviewed your drawings, the provisional sums should not be extensive or excessive.