When you get a fixed price construction contract for your renovation or new home build, you will find that your building contract also includes a variable component to cover things which cannot be precisely costed at such an early stage. These variable elements are referred to as Provisional Sums (PS items) and Prime Cost (PC) items in your building contract.
What are PS Items? provisional SUMS
Provisional Sum or ‘PS’ Items are those items that are made up of a labour component and/or material component that is unknown before the start of the project, but we know that it will be required, so we put an estimate towards the task in your quote. This final price is subject to change based on the final scope of work.
Examples of PS Items in a building contract
Before we start excavating, we don't know the type or quantity of material we'll need to dig out and dispose of. We put an allowance for the time labour and time of machinery hire, for the disposal costs at a waste management facility, and also for the transport of waste material.
Things that impact price:
Whether we encounter rock, whether additional engineering is required based on what the excavation uncovers, whether asbestos is found.
Custom joinery such as kitchen, laundry, linen press, TV and BBQ units, vanities, mirror cabinets and wardrobes can vary in price greatly based on your chosen layout and choice of finishes. It is generally difficult to get the finer details of design organised and priced many months out from the commencement of a renovation or new home project, so a PS allowance is made for the task.
Once we have a final layout design (including things like cupboards vs draws) and finishes for things such as door profiles, handles, benchtops and splashbacks have been confirmed, we are able to provide a final cost.
Labour to install specialty or custom items such as feature electrical fittings, designer door hardware, feature pattern tiles e.g. herringbone, mosaic, subway or handmade tiles where it's difficult to determine the labour required to install until the fixtures have been selected and specifications provided to the builder. These are generally finalised just before or in the early stages of the construction works and the final costs determined.
What are PC Items? Prime Costs
Prime Cost or ‘PC’ Items generally refers to those items which are purchased from a shop and typically in a box completed ready for installation. PC items refer to the cost of the item only, and excludes things like delivery and installation.The cost of these items depends on a client's design choices and can't be accurately costed until those selections are made. At the quoting phase of the project, the builder will ask if the client wants to pick from a Low/Medium/High range cost to put the allowance towards a more realistic item value. The Builder can then provide a range from a local retail outlet/supplier for the Client to select from to suit the budget.
Once the items are selected the cost is compared to the allowance and a variation up or down is determined.
Examples of PC Items in a building contract
Bathroom & kitchen fixtures
Whitegoods, stove, tapware, basins, toilets, electrical fittings, pendant lights.
Floor boards, tiles, carpet
Some builders (us included!) are happy to exclude PC items and allow the client to have complete control of the items they are buying, giving full flexibility to choose suppliers and manage their budget. This will save on Builder's Margin, but will also mean that the client is fully responsible for:
Receiving and checking delivery for defects
Ensuring deliveries are made in time to avoid delays to building schedule
Ensuring fixtures are fit for purpose and meet Australian Standards
Any ongoing warranty issues
Don't forget to budget for margin on PS and PC items!
Builder's Margin is applied to all PS and PC items to cover the cost of managing labour, organising and scheduling subcontractors and plant, equipment and material deliveries, supervising and quality control for all tasks, ordering and organising delivery for PC items, checking for defects and managing warranty issues, organising subcontractors to install items.
Where an allowance has been provided in your contract, any credit or over-run will be adjusted in your invoice.