One of the over looked items in your building contract could be the Prime Cost Sum (PC Sum) or (PC) also known as a provisional sum and it could cost you a lot of money by the end of the contract. PC Sums are also a very good way for less than honest builders to manipulate their quotes so that they look as if their price is less than prices submitted by other builders.
Understanding the PC sum is crucial to your finances and it’s not that hard to understand or see how it can be manipulated by the less than honest builders.
Here I will show you how this works and what to look for. The PC sum is simply a sum of money in your contract that is set aside for items in your build that have not yet been fully established. Put another way this is a provision to allow for the cost of an item without actually having decided on the item or knowing the cost of it, (provisional sum).
The reason a PC Sum exists is; you may not have decided on say the kitchen fittings and or cabinetry and both these items can vary wildly. A good example is the bench top. This could be laminate on mdf board or granite. Your architectural plans probably show the kitchen layout (benches, hot plates, fridge etc.) but have not specifically specified the materials or the appliances and this could be because you decided to sort this out at a later date or you didn’t want to pay more for your consent plans to have these items drawn and specified or this service simply was not available to you. This is where the builder will enter a PC Sum for the kitchen and in all fairness to builders this amount may be based on a previous kitchen they have installed or an educated guess which is reasonable.
The most important part to remember about PC Sums is that this is the amount you agree to be liable for in the contract price and if the items tagged under PC sum in your contract go over this amount then you will have to pay the builder the difference. Conversely, if you go under the PC, the builder will need to credit you the difference off the contract price and this means you will pay the builder less at the end of the contract everything else being equal.
You have to understand how much your PC sum is and what it is for. At the end of the contract you need to have the accounts available for the items you requested so this can be worked out and amounts added or subtracted from the contract. While it is important that you the owner has this information, Architecture intouch believe it is up to the builder to prove the over or under spending by presenting the invoices clearly to you and compariing this against the PC sum in your contract. We also believe the owner should request clear and concise invoices or costings for items covered by a PC sum during the contract.
Now the part where PC sums can be manipulated. This is very easy for a less than honest builder to do and as they say “the Devil is in the small print”. If you have items in your builders contract that come under a PC sum where the builder has put a Dollar value on without consulting you or even if they have consulted you and you don’t know how much this should be, then this is where the builder can manipulate his pricing to be more competitive and then claw it back at the end of the build.
The way this is done is, the builder first creates a PC sum out of an item or multiple items that may not fully be quantifiable but certainly can be estimated within reason. A good example is drainage as I have a first hand account of this situation happening to a client although it was after the fact and the example below should explain in detail how the scam is achieved.
Drawings were prepared for a new house and consent drawings submitted to Council which included drainage plans as required by Council’s check list. Council approved the drawing and a consent was issued (I should point out here that architectural drainage plans can only be submitted as one option which is usually the most logical and that it can be the case that a drain layer may want to do it another way for various reasons such as ground slope or obstructions). Prices for the new house were obtained from three builders and one of the builders priced around $20,000 (about the price of a new car) under the other two and the client gave this builder the job As it turned out the builder had included the drainage in the PC Sum which may be reasonable due to the nature of drainage and ground but the amount he had included was around $1000 Dollars for a drain that was later estimated from the architectural plans at the then current per lineal meter rates as being $20,000. At the end of the job the builder presented the owners with an extra for $20,000 (this would be around $50,000 now). The reason the builder gave to the owners was that the drainage plan in the consent drawings were drawn wrong and there was a lot more drainage required than shown on the plans. Understandably the owners were upset and angry and approached me for an explanation.
Clearly there was something wrong as a quick measure of the architectural plans submitted showed there was so many meters of drainage required and multiplying this out by the rate per meter for drainage at the time showed the PC sum should have been $20,000. The fact that $20,000 kept coming up rang some reasonably large bells and I was aware that the drainage contractor was required to submit an as built drainage plan to the Council and I promptly applied for this and compared the architectural plans with the as built plan and guess what, they were identical. The owners realised they had been tricked by the builder using the PC sum to hide his real cost in his quote. I didn’t find out what the outcome was from the owners except I remember they passed my name on to a friend saying they wouldn’t find a better person than Ross Newby and this culminated in another commission for me.
Hopefully this has helped in your understanding of PC sums and what to watch out for. Clearly PC sums should be based on some form of reality such as simply measuring off the drawing and putting a reasonable Dollar number on the measure as shown above. The other way to go about this is to have a registered quantity surveyor (Q.S.) measure you drawings. A registered Q.S. will stand by you in these types of instances and usually what he or she says in Court is taken as absolute. A quantity survey is really a construction accountant who prices building quantities including labour costs. Compared to the cost of the project, a Q.S. is usually very reasonable.
Ross Newby Architectural Designer – Design 3 LBP.