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Last edited 02 Jan 2023
Prime cost sum
 What is a prime cost sum?
A prime cost sum (PC or PC sum) is an allowance, usually calculated by the cost consultant, for the supply of work or materials to be provided by a contractor or supplier that will be nominated by the client - that is, a supplier that is selected by the client to carry out an element of the works and imposed on the main contractor after the main contractor has been appointed. The allowance is exclusive of any profit mark up or attendance by the main contractor such as material handling, scaffolding and rubbish clearance, etc.
Payments are made based on the quotations/invoices of the supplied items by the contractor plus addition of reasonable/agreed percentages for overhead costs and profits. If the contractor's actual cost is higher than the allowance, then the contract sum will be increased and if the cost to the contractor is lower, then the contract sum will be reduced by the balance.
Prime cost sums should not be confused with provisional sums which are allowances for specific elements of the works not yet defined in enough detail for contractors to price. For more information, see The difference between a prime cost sum and a provisional sum.
 Why are prime cost sums used?
- For long delivery items where design and manufacturing times cannot wait for the appointment of a main contractor. For example, lifts, switchgear or refrigeration plant.
- Where specialist design input is required in the early stages of design development. For example, for a cladding system.
- Where the client directly orders a preferred piece of equipment on which design is to be based. For example, an MRI scanner, laboratory fume cupboards or bottling plant.
 What are the problems associated with prime cost sums?
In addition, the courts have generally taken the view that risk in relation to the performance of a nominated sub-contractor lies with the client and not the contractor. This means that delay to the overall programme caused by a nominated sub-contractor can lead to a claim for extension of time under the main contract and entitlement to consequential losses.
'NRM1: Order of cost estimating and cost planning for capital building work' defines a prime cost sum as; '...a sum of money included in a unit rate to be expended on materials or goods from suppliers (e.g. supply only ceramic wall tiles at £36.00/m2, supply only door furniture at £90.00/door or supply only facing bricks at £390.00/1,000).
'It is a supply only rate for materials or goods where the precise quality of those materials and goods are unknown. PC Sums exclude all costs associated with fixing or installation, all ancillary and sundry materials and goods required for the fixing or installation of the materials or goods, subcontractor’s design fees, subcontractor’s preliminaries, subcontractor’s overheads and profit, main contractor’s design fees, main contractor’s preliminaries and main contractor’s overheads and profit.'
- Bill of quantities.
- Consequential loss.
- Contract conditions.
- Contract sum.
- Defined provisional sum.
- Final account.
- Nominated sub-contractor.
- Outturn cost.
- Payments to nominated sub-contractors.
- Prime cost price.
- Provisional sums.
- The difference between a prime cost sum and a provisional sum.
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