When dealing with construction contracts, terms like Prime Sum and Provisional Sum often come up, especially in the context of cost estimation and budget allocation. While they may sound similar, they serve different purposes in a project and have distinct implications for budgeting and risk management. Understanding the difference between them is crucial for contractors, project managers, and clients alike.
What is a Prime Sum?
A Prime Sum (also referred to as a Prime Cost Sum or PC Sum) is an allowance included in a contract for a specific item of work or material that hasn’t been fully specified at the time of tender. It’s typically used for fixtures, fittings, and other elements where the final choice is yet to be made by the client.
Example:
Let’s say you’re constructing a new home, and the kitchen appliances have not yet been selected. The contract might include a Prime Sum of $15,000 for kitchen appliances. Once the client decides on the actual models, the final cost could be more or less than the allowance. Any difference is adjusted in the final account.
What is a Provisional Sum?
A Provisional Sum is an estimated allowance set aside for work that is foreseen but not fully defined or scoped at the time of tender. It could relate to additional excavation, unforeseen ground conditions, or future landscaping works.
Example:
In a building project, a Provisional Sum of $25,000 might be included for landscaping, where the scope and design are not finalized. Later in the project, once the landscape design is confirmed and work is completed, the actual cost may be more or less than the provisional allowance, which is then reconciled.
Key Differences Between Prime Sum and Provisional Sum
| Feature | Prime Sum (PC Sum) | Provisional Sum |
|---|---|---|
| Purpose | For materials/fixtures not yet selected | For work/services not fully defined |
| Scope Known? | Quantity known, but quality/specs pending | Both quantity and scope uncertain |
| Client Control | Client usually selects the item | Usually instructed by the principal/engineer |
| Adjustments | Based on actual cost of selected items | Based on actual scope of work done |
| Risk | Risk typically lies with the client | Shared or on the contractor depending on contract |