When it comes to building contracts, there are a number of different terms and concepts that can be confusing for those who are not familiar with the industry. One of these is the concept of a prime cost item. In this article, we will take a closer look at what prime cost items are and how they work.
In building contracts, prime cost items (sometimes referred to as “PC items”) are items or elements that have not yet been selected or determined at the time the contract is signed. These can include materials, fixtures, or appliances that have not yet been specified in detail. Essentially, these are items that are not included in the main contract price, but are accounted for separately.
The reason for this is that it can be difficult to determine the exact cost of these items at the time the contract is signed. For example, the exact model of a particular appliance may not have been chosen yet, or the decision on which type of flooring to use may still be up in the air. By accounting for these items separately, both the builder and the client can have greater flexibility in determining the final cost of the project.
When a prime cost item is included in a building contract, it is usually assigned a budget or estimate that is agreed upon by both parties. This budget will be used as a guide for the client when selecting the specific item to be used in the project. Once the item has been selected, the actual cost of the item will be compared to the budgeted amount. If the actual cost is higher than the budgeted amount, the client will be responsible for paying the difference. Conversely, if the actual cost is lower than the budgeted amount, the client will receive a credit.
It is important to note that prime cost items are not the same as provisional sums. Provisional sums are used to estimate the cost of work that has not yet been fully defined, for example, excavation work that may be required but cannot be accurately estimated at the time of signing the contract.
Overall, prime cost items are an important aspect of building contracts. They allow for greater flexibility and transparency in determining the final cost of a project, and ensure that both parties have a clear understanding of what is included in the contract price. If you are planning a building project and are unsure about prime cost items, it is always a good idea to speak with your builder or a construction professional for more information.