PRIME COSTS & PROVISIONAL SUMS · VICTORIA
Prime Cost Items and Provisional Sums Explained: Why Building Quotes Can Change
An allowance is not the same thing as a fixed price.
Short answer
A prime cost item is generally an allowance for a fixture or fitting that has not been finally selected or priced when the contract is signed. A provisional sum is a reasonable estimate for work where the builder cannot yet state a definite price, such as uncertain excavation. If the actual cost differs from the allowance, the contract price can change in accordance with the contract and Victorian requirements.
Watch the EBC explainer
Prime Cost Items and Provisional Sums
Watch the EBC explainer to understand these common building-contract allowances and why the final project price can change.
Prime cost items are usually selection allowances
Prime cost items commonly relate to fixtures and fittings where the exact make, model or price is not known at contract signing. Examples can include appliances, tapware, sanitary fixtures or tiles depending on the contract.
A low allowance can make an initial contract price look attractive but may create additional cost when the actual selection is made.
Provisional sums are estimates for uncertain work
A provisional sum applies where the work is known but the builder cannot reasonably give a definite price at contract signing. Excavation is a common example because actual site conditions may vary.
Victorian guidance requires these allowances to be reasonable rather than arbitrary.
Compare the allowances when comparing quotes
Two quotations can have the same headline scope but very different allowances. Compare the value and assumptions behind each prime cost and provisional sum item, not only the final total.
Ask what evidence will be provided when the actual cost becomes known and how any adjustment or builder margin is calculated under the contract.
- ✓Which items are fixed and which are allowances?
- ✓What quantity and unit rate were assumed?
- ✓Is the allowance realistic for the finish level you expect?
- ✓What happens if the actual cost is lower?
- ✓How will increases be documented?
- ✓What margin or adjustment method does the contract permit?
Reduce allowances by making decisions earlier where practical
The more selections and site information that are resolved before contract, the more items can potentially be priced specifically rather than carried as allowances.
Some uncertainty cannot be eliminated, but a clear schedule of allowances makes the risk visible and easier to manage.
Planning a project like this? EBC builds home renovations, home extensions, custom new homes and knockdown rebuilds across Melbourne's Eastern Suburbs, and can talk through how this applies to your home.
Questions homeowners ask
What is the difference between a prime cost item and a provisional sum?+
A prime cost item is an allowance for a fixture or fitting that has not yet been specifically selected and costed, such as tapware, tiles or an appliance. A provisional sum is a reasonable estimate for work whose exact price cannot be determined when the contract is signed, such as excavation where site conditions remain uncertain.
What is an example of a provisional sum in construction?+
Excavation is a common example. The builder may know excavation will be required but cannot state the final cost until the actual ground conditions and quantity of work are known, so the contract carries a reasonable provisional allowance.
What is a prime cost item in a building contract?+
It is generally an allowance for a fixture or fitting included in the contract where the exact selection or price is not known when the contract is signed.
What is a provisional sum?+
It is a reasonable estimate for work where the builder cannot give a definite price at contract signing, such as uncertain excavation or other work dependent on conditions.
Can prime costs and provisional sums increase the final price?+
Yes. If the actual cost differs from the allowance, the contract price may be adjusted in accordance with the contract and applicable requirements.
How can I reduce the risk of allowance increases?+
Finalise selections and obtain better site information before contract where practical, then check that remaining allowances are realistic and clearly documented.
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