The difference between a provisional sum and a prime cost item, how each is adjusted, and why they are the most common cause of budget blowouts on residential jobs.
Provisional sums and prime cost items are the two mechanisms Australian building contracts use to handle "we do not know this yet". Used properly they are honest and useful. Used loosely they are the reason a client ends up paying $60,000 more than the contract price and feeling misled.
A PC item is an allowance for the supply cost of a specific product that has not been chosen yet. Tapware, appliances, floor tiles, door hardware, light fittings. The bill carries an amount — say $80 per square metre for floor tiles — and the client later selects an actual product.
If they choose $130/m² tiles, the difference is added. If they choose $55/m², it is credited. The installation labour is measured and priced separately, on the assumption that installing one tile is much like installing another. That assumption breaks down with large-format tiles, natural stone and herringbone patterns — which is worth flagging at the time rather than arguing about later.
A provisional sum is an allowance for work that cannot yet be measured, usually because the design or the site conditions are unresolved. Rock excavation before a geotechnical report. Landscaping with no landscape drawings. Connecting to services whose location is unconfirmed.
Critically, a provisional sum covers the whole cost of the work — labour, materials, plant and the builder's margin — not just supply. When the scope becomes known, the sum is replaced by the actual cost.
| PC item | Provisional sum | |
|---|---|---|
| Covers | Supply of a product | Complete work, including labour and margin |
| Unknown is | Which product | What the work involves |
| Installation | Measured separately | Included in the sum |
| Typical examples | Tapware, tiles, appliances | Rock excavation, landscaping, service connections |
Three reasons, and all three are avoidable.
The allowances are set too low. A $40/m² tile allowance in a project with a $90,000 kitchen is not a realistic estimate — it is a way of making the headline price look competitive. The client will select accordingly and the adjustment will be brutal.
Nobody totals them. Individually a PC item looks small. Twenty of them on a residential build can add to $150,000 of a $900,000 contract, meaning a sixth of the price is not actually fixed. Always add them up.
The client does not understand them. Most residential clients hear the contract sum as the price. Unless someone sits down and explains that these particular lines will move, the eventual adjustment feels like a builder inventing charges.
Domestic building contracts in most Australian states carry specific requirements about how provisional sums and PC items are disclosed and adjusted, and in some jurisdictions a builder's margin on adjustments is regulated. The detail differs by state and it is worth confirming your contract wording with your solicitor rather than relying on a template. This article is general information, not legal advice.
Usually yes, and the contract should say so explicitly and state the percentage. The specifics are regulated differently in each state, so check the contract you are using against your state's domestic building legislation with your solicitor.
The contract normally allows the builder to proceed on the allowance after giving notice, because waiting indefinitely holds up the programme. Document every request in writing — this is a common source of delay claims.
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