What is the difference between a prime cost item and a provisional sum?
A prime cost (PC) item is an allowance for the supply of a specific thing not yet selected, such as tapware, fixtures or equipment, where your labour to install is priced but the item itself floats. A provisional sum is an allowance for work that isn't yet fully defined. In both cases the allowance comes out when the real figure is known and the actual cost or value goes in. The risk sits in the adjustment rules: who values it, at what rates, and whether your margin follows the adjustment.
How the adjustment works
When a PC item is selected or provisional sum work is carried out, the allowance is deducted from the contract sum and the actual amount substituted under the contract's rules. If the actual figure is higher, the contract sum goes up; if lower, it comes down. The arithmetic is simple. The fights are about the inputs.
Three traps to price before you sign
Margin. Some drafting lets margin attach to increases only, or not at all, so the substituted value arrives bare. Check whether your overhead and profit follow the adjustment in both directions, and at what percentage.
Omission. Drafting that lets the builder omit provisional sum work entirely, or give it to others, can quietly shrink your contract. If the allowance was carrying some of your overheads, those go with it.
Valuation. Who values provisional sum work, and at what rates: your schedule of rates, the builder's assessment, or reasonable rates to be agreed later? Pin it down at tender, when it is your price being accepted.
Keep the paper trail
PC item and provisional sum disputes are small one at a time and corrosive in total. Confirm selections and adjusted amounts in writing as they land, and claim each adjustment in the next progress claim rather than saving them all for the final account.
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Scan my subcontract freeCommon questions
Is a PC item the same as a provisional sum?
No. A PC item covers the supply of a specific item; a provisional sum covers work. The adjustment mechanics are similar, which is why the two get confused.
Do I get margin on a provisional sum adjustment?
Only if the contract says so. Check the clause, and ask for your margin percentage to apply to adjustments in both directions.
What if the builder omits the provisional sum work altogether?
Check whether the contract lets them, and whether it lets you recover anything for the overheads the allowance was carrying. If it doesn't, that is a term to negotiate before signing, not after.
Terms in this guide
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General information for Australian subcontractors, not legal advice. Statutory deadlines and details vary by state and change over time; verify them before relying on them. Written by Mat Kennedy at The Construction Contracts Co.