PC Sums and Provisional Sums Clarified
In Construction the term PC sum is often confused with Provisional Sum. Whilst both terms are associated to allowances being made for a specific activity or item, there are distinct differences in these two terms. PC Sums are normally associated with an average cost of a specific item whereas Provisional Sums are estimated allowances. Let's look the usage of these two terms in the Construction environment.
PC Sum or otherwise referred to as Prime Cost Sum reflects the material allowance being made in the rate for a specific item. A quoted rate normally consists of Material, Labour, Plant and mark-up (profit + overheads). By using the PC sum reference the builder identifies what material sum he has allowed for in his rate. This is normally done when the specification of the item has not yet been clarified (for example finishes, tiles, taps, light fittings, etc.). The builder would allow a reasonably accepted average cost for that item which is generally based on the builders past experience. Care must be taken in analyzing these allowances as builders understand the impact this has on their price and could make below average allowances in order to present the lowest bid.
Let's look at an example:
Supply and lay 300 x 300mm Tiles (PC Sum $25/m2) 200m2 $42.45/m2 $8,490.00
The above item clearly identifies the amount allowed for tiles is $25/m2 and the total rate inclusive of labour, waste and mark-up amounts to $42.45/m2. That means that the Client can buy or select tiles to the value of $25/m2 without it having any effect on the Contract Price. This also mean that if a lower priced tile is selected the Contract Price reduces with the same margin or vice versa.
The use of PC sums are very popular in the Home Builders market as Clients with limited building knowledge understand this concept and enjoy having control over this selection process during the final construction stages of their new home.
Provisional Sums on the other hand are estimated allowances for work that involves both supply of material, labour and associated work. This normally involves a specialist subcontractor for example; an allowance for the installation of new Kitchen cupboards. The builder may base his allowance on an average market rate per metre of identified cupboard space. However, the final price will be based on an agreed design and finishes as prepared by a specialist. Once agreed the Builder will be entitled to add his agreed mark-up percentage to the subcontractor quotation.
The Contract Price is adjusted by omitting the PS allowance and adding the actual expenditure including mark-up. Provisional sums can therefore have a significant impact on the Contract Price if not correctly assessed.