The difference between a prime cost sum and a provisional sum
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[edit] Introduction
There is sometimes confusion regarding two items that may appear in standard forms of building contract – prime cost sums (PC or PC sums) and provisional sums (PS). They both relate to allowances made for certain costs in the absence of exact figures, but they are actually quite different.
[edit] What is a prime cost sum?
A prime cost sum is an allowance, usually calculated by the cost consultant, for the supply of work or materials to be provided by a sub-contractor or supplier that will be nominated by the client - that is, a sub-contractor or supplier that is selected by the client to carry out an element of the works and imposed on the main contractor. The main contractor is entitled to add mark up and attendance costs to the allowance.
Actual payments are made based on the quotations/invoices of the supplied items plus the addition of reasonable/agreed percentages for overhead costs and profits.
If the main contractor's actual costs then turn out to be higher, the contract sum is increased, and if the main contractor's actual costs are lower, the contract sum is reduced.
For more information see: Prime cost sum.
[edit] What is a provisional sum?
A provisional sum is an allowance, usually estimated by a cost consultant, for a specific element of the works that has not been defined in enough detail at the time that prices are sought from tenderers, for those tenderers to accurately price them. Provisional sums are replaced by valuations of the work actually done as the project progresses and so the contract sum may increase or decrease.
Depending on the degree to which the works that the provisional sum relates to can be described at the tender stage, provisional sums may be referred to as 'defined' or 'undefined'.
- Defined provisional sums are those which have been described in sufficient detail for the tenderer to make allowance for them in their programming, planning and pricing preliminaries.
- Undefined provisional sums are less well described and so the tenderer cannot be expected to make allowance for them in their programming, planning and pricing preliminaries.
For more information see: Provisional sum.
[edit] Summary
In summary, both provisional sums and prime cost sums are allowances for items that cannot be accurately priced when tenders are sought. Provisional sums relate to items for which there is insufficient information - such as earthworks for example, where it may be difficult to determine what is required before some excavation has been undertaken, whereas prime cost sums relate to suppliers or sub-contractors that are nominated by the client, such as specialist equipment suppliers for example.
As both add a degree of uncertainty to the contract sum, they should generally be discouraged.
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Comments
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Is PC for a specific element? It seems that it does not match the Home Building Contract?
It is for a specific element of the works. This is a term used in the UK, it may be that definitions / contract terms are different in other countries.
That's so vague
As with all construction terms, the exact definition will depend on the contract that is being used.