a Prime Cost Sum (PC Sum) refers to an allowance in the contract for the supply of materials or equipment that have not yet been selected or whose exact cost is not known at the time the contract is signed. This sum is included in the contract to cover the anticipated cost of these items, but it is an estimate rather than a fixed price.
The PC Sum typically covers items like fixtures, fittings, or specific equipment that the client will choose later. Since the exact specifications and costs are not determined at the outset, the PC Sum provides a placeholder amount in the contract. Once the items are selected and their actual costs are known, the contract sum is adjusted accordingly. If the actual cost is higher than the PC Sum, the client usually pays the difference. Conversely, if the actual cost is lower, the client may receive a credit.
The use of PC Sums allows for flexibility in the selection of certain materials or equipment while still enabling the project to proceed with a defined budget framework.
Prime Cost Sums provide flexibility in the contract, allowing the owner to select specific items, such as fixtures and fittings, after the contract has been signed . This allowance is included in the contract price and is based on the initial agreed-upon scope .
Key Characteristics
- Prime Cost Sums are typically denoted as "PC sums" with an amount next to them in quotes .
- They are used for specific supply items where the final choice has not been made at the time of contracting .
- Prime Cost Sums are different from Provisional Sums, which are monetary allowances for carrying out work with an indeterminate extent and nature .
Importance in Commercial Construction Projects
Prime Cost Sums play a crucial role in Australian commercial construction projects, as they allow for flexibility in the selection of specific items and provide a mechanism for managing uncertainties in the contract price. By including Prime Cost Sums in the contract, parties can ensure that the project is completed according to the agreed-upon scope, while also allowing for adjustments as needed.
