Provisional sums and prime cost items explained

Two line items appear in almost every residential building contract, look like prices, and are not prices. Between them they are responsible for a large share of the gap between what people expect to pay and what they end up paying.

They are not a trick. They are a legitimate answer to a real problem: at the point you sign, some things cannot be priced yet. The difficulty is that they are routinely presented as settled figures, and compared as though they were.

Prime cost items: allowances for things

A prime cost item is money set aside for a product you have not chosen yet. Tapware, tiles, the oven, the front door, floor coverings, the kitchen sink.

The contract carries an allowance for floor tiles, expressed as a rate per square metre. At selections you choose a tile that costs more than the allowance, and you pay the difference. Choose one that costs less and, in principle, you are credited.

Before any of that arithmetic, check what the allowance actually covers. Tile allowances are very often supply only, with laying priced separately — and laying labour is a substantial cost in its own right. If you assumed the allowance covered a finished floor, it is a far smaller allowance than you thought, and that is usually discovered at selections rather than at signing.

In practice almost nobody selects below the allowance. Selections are made in a showroom, against displays chosen to be desirable, at the point in the project where you are most emotionally committed and least inclined to economise. Builders know this. Allowances are frequently set at a level that is technically achievable and practically unlikely.

Provisional sums: estimates for work

A provisional sum covers work that has not been fully scoped, and includes labour as well as materials. Site works before a soil test, retaining before the fall is surveyed, driveway before the final levels are known.

When the work is done, the actual cost replaces the estimate. If it costs more, you pay the difference — and usually the builder's margin on that difference as well.

The short version: PC items are things, provisional sums are work.

How to read the allowances in front of you

For every PC item, the useful question is not "what is the allowance?" but "what can I actually buy with it?"

• Take the tile, tap and appliance allowances into a supplier and see what they buy in the real world
• Check whether the allowance is supply-only or supply-and-install — a common and expensive ambiguity
• Look at how many PC items there are. A long list is not automatically bad, but it means more of your final price is undecided
• Ask which allowances the builder finds clients most often exceed. A straight answer to that is a good sign

For provisional sums, ask what scope the estimate assumes, what would make it move, and whether the builder's margin applies to the increase.

The margin question

When a provisional sum or PC item runs over, you generally pay the overrun plus the builder's margin on it. That percentage is in the contract, and it is worth knowing before it becomes relevant.

It also creates an incentive worth understanding: a builder who sets low allowances wins the job on price and earns margin on every subsequent adjustment. That is not an accusation, and plenty of builders set honest allowances. But the incentive exists, and it explains a pattern you will otherwise find puzzling.

Reducing your exposure before you sign

• Convert what you can. Every selection you make before contract is one fewer allowance. If you know the tiles you want, get them specified and priced rather than allowed for.
• Get the soil test and survey done early. This converts the largest provisional sum of all — site works — from a guess into a figure.
• Ask for the allowance schedule as a separate document. Every PS and PC in one list, with amounts. If that list is difficult to obtain, that is itself information.
• Budget above the allowances, not to them. Assume you will exceed most PC items, because most people do.
• Check credits are real. Confirm in writing that selecting under an allowance is credited back, and how.

What good looks like

A well-constructed quote has relatively few provisional sums, realistic PC allowances, a clear schedule of both, and site works priced against actual site information rather than assumption.

It will often look more expensive than the alternatives. It usually isn't. A quote that is honest about uncertainty is a quote you can plan around, and the builder prepared to write down a higher, defensible number at the start is generally the one with fewer awkward conversations at selections.