There’s a reason that lawyers are in high demand – contracts can be confusing and difficult to read. With many new concepts and terms introduced, a building contract can be daunting to read, much less sign.
A few terms that often lead to the most questions are prime cost and provisional sum.
Prime Cost
According to Turtons Lawyers, a prime cost is “an allowance made for a specific supply item, where the final choice of the item has not been made at the time of entering the contract.” [1] Prime costs are typically entered for fixtures and fittings such as door handles, stovetops, and tapware.
If, after the item has been purchased, the actual cost of the item is low, the prime cost will reflect this.
Provisional Sum
A provisional sum is an allowance included in a building contract where the cost of a contract item cannot be known by the builder before the contract is executed.
Provisional sums are often used for plumbing, electrical, and other items that cannot be concretely priced until the renovations have begun.
The Difference
Simply stated, the difference between a prime cost and a provisional sum is that a prime cost applies to the item itself while a provisional sum refers to the item and the cost of installation. Prime cost allowances allow flexibility for items not yet chosen by the homeowner while provisional sums are used when it is impossible to know the exact price for a section of work.
Prime costs and provisional sums are beneficial to both the builder and homeowner as they promote fair pricing for both parties. If the actual cost is low, the prime cost or provisional sum will reflect this. It also ensures that if the price is higher than the allowance, the builder is not losing out on profit for the project.
In the end, knowing exactly what you’re paying is always ideal, but unfortunately, there are many situations in which unforeseen costs arise. A good builder will provide you with a price as accurate as possible, but prime costs and provisional sums can be preferable as they are beneficial to both parties.