Prime Cost (PC) and Provisional Sum (PS) Items

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Hanna Wolfe July 15, 2018
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Prime Cost and Provisional Sums  items are those costs that cannot be accurately costed in the contract stage. So, Builders or Estimators just do their best guesses and calculate it as an allowance. It saves time in going to contract stage and writing the specification. 

What are PC Items?

PC stands for Prime Cost. A Prime Cost item is an amount of money which has been allowed for and hasn't been specified or selected by the customer before the contract signed. The PC amount is allowed to supply the item only, and it doesn't include any allowance to install it.

For example, the PC allowance for Tiles, are just the allowance to purchase the tiles only, which will be selected by the customer later, and it doesn't include the cost of laying them by the tiler.

A separate item should be allowed for by the builder or the estimator to cover the installation costs.

What are PS Items?

PS stands for Provisional Sum. Provisional Sum items are similar in that they are an allowance for an unknown item, but it includes the material AND the labor.

PS allowances are often used for excavation, where the exact quantities are not known, or items like kitchen cabinet which hasn't been selected by the client, and the price includes supply and installation.

Legislation

On top of the both amounts mentioned above, an amount to cover administrative and other overhead costs, as well as the builder's profit should be added.

All trade discounts must be passed on to the client, and all the invoices should be sent to the customer, if requested. Everything should be clear and exposed to the client, when using PS and PC allowances.

However, legislation places the responsibility on the builder to make sufficient and fair allowance to purchase the items which is of a suitable standard, for the value of the project as a whole (i.e. the PC allowance must be for an item that would be reasonably expected in a house of equivalent value). Customer won't want a $70 kitchen mixer on a 1.2-Million-dollar house!

Adjustments and variations are made to the final contract sum, either as an addition or as a refund, as required.

The builder or contract administrator must ensure that the client is aware of any costs overruns prior to commitment.

When should the variation be paid?

All variations must be submitted by the builder in writing, and agreed, signed, and sent back to the builder by the client, before work commences. The builder / contractor can submit an extension of time if applicable.

Once a variation is signed by the client, the payment should be made in accordance with the time stated in the variation document. If the variation is a credit to the client, the client is credited back at the according progress claim of the variation. But if it is a debit, the client should pay when the variation is signed.

For example, if a variation to the kitchen cabinet is submitted by the client at the slab stage, the client should pay the variation once it is signed. but if it is a credit, the builder gives back the credit at the pre-paint stage.

The reason is that sometimes the builder should pay a portion of the costs, when ordering the items. Also, giving back the money to the client at the time of the variation might cause some serious cash-flow problems for the builder.

How to Set PC or PS allowances in Breinz Estimating Software?

To set the provision type of an item in Breinz, goto Bill of Quantities page, select an item, and click on the edit button:

Breinz Estimating Software edit items

On the edit item menu, you can find on the Type Drop Down Menu, the Options for setting the item type: N/A: items which are not PS or PC. P.S: for Provisional Sum Items, P.C: For Primed Cost items

Breinz Estimating Software PS PC items

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