In building construction, both during the period of quoting or estimating and also the construction period, by the very nature of the work, there will always be some unknown factors. The usual procedure is to allocate a cost against the unknown factor that will be validated at a later time.
Generally, these costs are known as Provisional Sums or Prime Cost allowances.
Provisional sums can be interpreted to include one or all of the following:
• Provisional Sum (PS)
• Prime Cost (PC)
• Contingency Sum (Design Contingency)
It is important to remember that it is common in the home building industry that the Calculations for the amount to allow for PS and Ps sums are covered by legislation. In the State of Victoria the key Legislation Dictating Contract Sums is the Domestic Building Contracts Act (DBCA).
Are monetary allowances for the carrying out (generally elements) of work, the extent and nature of which is indeterminate at the time of preparing the quotation. An example of a PS could be an allowance for the supply and installation of an air-conditioning system. It may be that the specification only calls for the provision for the system and an allowance made as to the anticipated cost to supply and install such system. In this case the Estimator/Builder in the early stages of estimating would need to pick up this cost and include it in the estimate.
Alternatively the documents may call up a requirement for the supply and installation of a yet to be determined air-conditioning system but exclude any cost allowance. In this case the Estimator/Builder would make due allowance for the cost of such a system and again include this in the estimate.
Keep in mind that in the situation where the Estimator or Builder decides on the allowance it should be based on a fair assessment of what the work make eventually cost. No further costs will need to be included by the Estimator/Builder unless the specification requires some other associated work to be undertaken, for example an allowance for the electrical connection point to the unit.
Note: The estimator/builder needs to check the contract definition to determine the pricing makeup of the amount, as commonly the sum includes overheads and margins etc, that is, the total price for the specified work.
Are monetary allowances for the supply of materials items, the exact nature of which is not able to be determined at the time of preparing the estimate. An example of a PC could be an allowance for the purchase of wall and floor tiles.
As stated in the example of a PS above an allowance may be included by the Client in the contract documents expressed as $/m2, or the Estimator/Builder will need to nominate a sum in $/m2. In both cases the Estimator will be able to calculate the number of tiles required and make due allowance for the purchase of the tiles based on the rate nominated.
The cost of installation of the tiles will need to be calculated separately based on the area shown or nominated in the contract documents and the cost of installation including any fixing materials, grouting, supervision and margins etc. included in the estimate.
Provisional Sum or Prime Costs Schedule
In the preparation of a quotation for work which may include PS or PC Sums, it is generally a requirement by the Estimator or Builder to state clearly in the quotation to the Client the exact amounts allowed. This is usually referred to in a Schedule and it should set out to show such things.