Most fixed-price building contracts are not as fixed as they appear. Tucked into the schedule of finishes and deeper into the special conditions are two categories that can turn a solid budget into an open-ended liability: prime cost items and provisional sums. Knowing what they are and how to read them is one of the most important things you can do before you hand over a deposit.
Understanding the Difference Between PC Items and Provisional Sums
A prime cost item, usually abbreviated as a PC item, is an allowance for a specific product that your builder has not yet selected or priced. Common examples include floor tiles, tapware, light fittings, and kitchen appliances. The builder inserts a dollar figure as a placeholder. If the product you choose costs more than that figure, you pay the difference plus the builder’s margin.
A provisional sum covers a scope of work where the full cost cannot be determined at the contract stage, such as site cut and fill, concrete driveways, or service connections. The builder provides an estimate, but once the work is completed and the actual cost is confirmed, the contract adjusts accordingly. If the real cost exceeds the estimate, you pay the gap.
Spotting Unrealistic Allowances in a Building Tender
Low allowances are how some builders reduce a tender price to win the job. A PC item set at $40 per square metre for floor tiles sounds reasonable until you visit a tile showroom and find that anything worth choosing starts at $65. The allowance was never intended to cover what most buyers actually select. Checking PC item rates against real retail prices before you sign takes less than an afternoon and can reveal a substantial shortfall across the full schedule.
Calculating How Overruns Actually Get Charged
The cost of exceeding an allowance is rarely just the price difference. Most contracts allow the builder to apply a margin, often between 15 and 20 per cent, to any overrun or variation in PC items. On a kitchen where the appliances run $8,000 over allowance, that margin adds another $1,200 to $1,600. Across a full home with a dozen PC items, those margins compound into a figure that can strain the budget well before handover.
Watching for Dual Occupancy Exposure
A dual occupancy build amplifies the risk considerably. Two full kitchens, two sets of bathrooms, and two complete sets of floor finishes mean double the PC item exposure. The provisional sums also double, and a site with any slope or drainage complexity can see those figures run well above initial estimates. Builders pricing dual occupancy projects often apply the same conservative allowances they use for a single home, and buyers rarely notice until selections are underway.
Asking for a Full PC Schedule Before You Sign
Request a complete list of all PC items and provisional sums before you sign, with dollar amounts clearly stated against each line. Then price every item against what you actually intend to choose. If the allowances fall consistently short, request an adjustment before the contract is executed. A builder confident in their pricing will not resist that conversation. One who discourages it is giving you useful information regardless.
