Construction projects are expensive and time-consuming so you want to be crystal clear on the costs and what you’ll get for your money. The terms Provisional Sums and Prime Cost Sums found in construction estimates and contracts can cause confusion, though their function is to give the best information when some aspects of the job aren’t fully cut and dried.
In this blog, we clarify the definitions, differences, and practical implications of Provisional Sums and Prime Cost Sums.
What are Provisional Sums and Prime Cost Sums?
Provisional Sums and Prime Cost Sums are two items in building estimates or contracts that should not be confused – though all too often they are.
A Provisional Sum (Prov Sum) is provided within the budget for work or costs which cannot be accurately foreseen. When the actual costs are known, the Provisional Sum is deducted and replaced with the actual cost.
A Prime Cost Sum (PC Sum) is a sum provided at the time of budgeting for work or services to be executed by a sub-contractor or for materials to be obtained from a supplier. This is then adjusted when the actual cost is known.
What’s the difference between Provisional Sums and Prime Cost Sums?
The simple definitions on their own are similar but the two have different functions. A PC Sum instructs the contractor to spend a certain amount on a given defined item. The scope of what’s required is clear and the sum specified gives a guideline on the quality expected. The contractor may get competing prices from suppliers and submit them to the client to get a decision. The amount paid to the contractor will be the amount of the invoice from the supplier. In order to gain a profit on the supply of the item, the contractor will need to submit an item in their valuation, “Overhead and profit on PC sum” because there’s no allowance for contractor’s profit within a PC Sum.
A Provisional Sum on the other hand, is used to cover an area of uncertainty. Either the design is incomplete or a decision is needed from the client – or the tenderer may have failed to complete their costing and entered their best guess for an item as a Provisional Sum. Included in the Provisional Sum is the contractor’s allowance for their profit. Provisional Sums may be defined or undefined. A Defined Provisional Sum is sufficiently certain for the contractor to be expected to make allowance in their programme for it. In the case of an Undefined Provisional Sum, they may allow for the time they expect it to take but the client has the right to change their mind and may omit the item in question completely.
How do you Appraise a Tender? Tender appraisal is an important activity in getting a project started because all construction and civil engineering projects are major items of expense and getting the best outcome is important. Looking straight at the bottom line rather than appraising each element carefully is a mistake because what’s important is the final actual cost, not the figure in the tender or estimate.
To get the best possible result, the tenders should be appraised in as much detail as possible. One question you should ask is, are the Prime Cost Sums and Provisional Sums limited and used as they should be, as a straightforward way of preventing incomplete information from holding up the project or is there something less acceptable in their use?
Conclusion
Understanding the differences between Provisional Sums and Prime Cost Sums is key to a smooth construction project. These terms might seem similar, but they play distinct roles. Whether it's dealing with uncertainties through Provisional Sums or managing defined costs with Prime Cost Sums, clarity is essential for project success.
When appraising tenders, it's crucial to look beyond just the bottom line. Take the time to evaluate each detail, including how Provisional Sums and Prime Cost Sums are used. This approach helps prevent surprises and ensures a more efficient project journey.
By grasping these terms and adopting a detailed approach to tender appraisal, individuals can better navigate building quotations, fostering informed decision-making and enhancing overall project understanding.
At Saunders Brothers we're committed to providing transparent and reliable construction services tailored to you. With our years of expertise, we aim to make your construction experience as smooth and stress-free as possible.
If you’re planning to start a project and have questions about Provisional Sums or Prime Cost Sums, or about any other aspect of the construction process, don't hesitate to reach out. Contact us today at mail@saundersbrothers.co.uk or give us a call on 01844 273783 to discover how we can turn your vision into reality.