Understanding Provisional Sums and Prime Costs in Your Building Contract

What are Provisional Sums in Your Building Contract?

Provisional sums are essentially a ‘placeholder budget’ within a construction contract when some aspects of the scope and selections of your build are uncertain. It creates flexibility for everyone involved and ensures your project can continue, subject to the provision that some sums may change.

While this flexibility is useful for many home builders, it can also create issues down the line due to unanticipated cost variations. Provisional sums need to be carefully considered before signing any construction or building contract.

Provisional sums cover a range of work that can’t be precisely determined at the time of signing your contract. This includes:

• Demolition, site work, and earthworks: This may include additional site excavation or site preparation that can’t be fully determined until construction begins.
• Rock breaking and removal: As above, additional rocks may be encountered during excavation that require more extensive breaking and/or removal than anticipated.
• Landscaping and drainage work: These go hand in hand, as more extensive drainage work can quickly lead to more extensive landscaping.

Specialist contractors: Any specialist or bespoke contractors that may be required during the build that can’t be determined at the time of contract development.

What are Prime Costs in Your Building Contract?

Prime costs are another type of ‘provisional budget’ within the construction contract, covering different components or items. This includes items that may need to be installed during the build and may require specialist contractors, such as kitchen appliances, lighting fixtures, and certain types of flooring.

Prime cost covers the estimated cost of these items, but usually doesn’t include installation fees. When the items and their actual costs are confirmed during the project, the contract is adjusted accordingly.

This flexibility allows you to adapt your choices through the build, but it can also introduce ambiguity into the total cost of your overall build.

What do Prime Costs Cover?

Prime costs cover actual items rather than unexpected works or contractor fees. This includes things such as:

• Material costs: Premium materials can quickly exceed initial expectations once scarcity, shipping, and specialist requirements are factored in further down the line.
• Changes to appliances: If you change or upgrade your appliance choices during the build, this can impact the prime cost estimate in your original contract.
• Additional appliances or fixtures: If changes are made to your overall build, for example, adding an additional restroom, ensuite or laundry facilities, this will adjust the prime cost budget.

Specialist materials or fixtures: Swapping standard materials or fixtures for more specialist or prime materials or fixtures will adjust the prime cost estimate. This includes the materials themselves and the specialist contractors required to fit them.

Work With the Right Team to Understand Your Next Build

Having the right team to help you navigate your first home build, including contract terms, conditions and jargon, can make a real difference.

The IMSU team are here to help you every step of the way. If you’re at the beginning of your journey and looking to work with an experienced team, book a consultation or explore our display homes.