PRIME COST AND PROVISIONAL SUMS

Question 1

1. In an ABIC contract what is the meaning of the term “prime cost sum”.

Answer 1

Prime cost sums relate to physical items that are installed into a project. Sometimes these items are already specified and have a cost attached to them; other times they have not yet been selected and again a realistic cost to cover that item should be allocated. Prime cost sums can change during a project and often that change is requested by the client.

Question 2

2. In an ABIC contract what is the meaning of the term “provisional sum”

Answer 2

A provisional sum is a cost allocated in a contract for a part of the works that has not been fully specified or documented.

Question 3

3. When would a prime cost sum be used and when would a provisional sum be used as part of an ABIC contract?

Answer 3

Prime Cost would be used for items such as fixtures and/or fittings i.e. basins, tapware etc that might not be selected, or may be changed during construction.
Provisional Sum would be used for items such as services i.e. electrical connection, which may not have been decided at the signing of the contract.

Question 4

4. What are the risks with using either prime cost and/or provisional sum? Give examples.

Answer 4

The risks are that the cost of works may increase significantly if the cost of these items comes in at a higher price than initially nominated. There may also be delays on these items if they have long lead times (if not decided in advance sooner), which will delay the date for PC and the builder may be entitled to variations.

Question 5

5. When would it be a good idea to use either? Give examples.

Answer 5

When the exact details of a particular item required for the building have not yet been specified in the contract documents on signing of the contract…

Question 6

6. Who decided the amounts to be used for prime cost and/or provisional sums? How are these figures established and where would they be found in the contract documents.

Answer 6

Provisional Sums – Schedule 6 Prime Cost Sums – Schedule 7
The figures are established by referring to items by a supplier of a particular quality or price range, and using this as a basis for setting the sum. Often the architect will assist the client in obtaining costs, with the client signing off on the decided amounts, or approving in writing. The architect may also request the contractor to provide a written quotation for either type of sum that is required (i.e. connection of infrastructure, supply and install of particular equipment, fee for a relevant authority).

Question 7

7. In an ABIC contract what is the procedure to be followed when using prime cost and/or provisional sums?

Answer 7

In the schedules, the description of the item, its cost (excluding GST) and particular person (if nominated) is to be written into the schedules.
The architect must adjust the cost of building work in the next progress certificate when the final amount is verified.
Where the cost increases to the schedule, the additional cost is increased by the percentage for builder’s margin.
Where the cost decreases to the schedule, the difference is deducted.