Prime cost items: products not yet finally selected

A prime cost item is generally an allowance for a fixture or fitting included in the contract when the exact product or price is not known at signing. Common examples include tapware, sanitaryware, appliances, tiles and door hardware. The allowance may cover the item itself, while labour, delivery or associated materials may be dealt with elsewhere in the contract—so the wording needs careful review.

If the selected product costs more than the allowance, the contract price can increase in accordance with the contract. If it costs less, the adjustment should operate the other way, subject to the contract terms.

Provisional sums: work that cannot yet be priced precisely

A provisional sum is a reasonable estimate for work where the full scope or cost cannot be determined at contract stage. Excavation is a familiar example, particularly where ground conditions remain uncertain. Other examples can include underpinning, remediation of an existing structure, service diversions or specialist work awaiting investigation.

In comparison: a prime cost item usually relates to the selection and cost of a product, while a provisional sum relates to the cost of carrying out a body of work.

Why allowances can distort comparisons

Allowances are not inherently problematic. They become risky when they are unrealistic, numerous or difficult to identify. A quotation with low allowances can present a more attractive headline total while leaving you exposed to predictable increases later in your journey. Two tenders may appear far apart even though the underlying construction cost is similar and the difference lies in allowance levels.

Compare both the amount and the basis of each allowance. Does it reflect the quality level shown in the design? Is the quantity realistic? Does it include GST, delivery, wastage, installation and the builder’s stated margin?

What Victorian owners should expect

Consumer Affairs Victoria states that contracts must contain a detailed list and cost breakdown for prime cost and provisional sum items, including estimated quantities and unit costs. Builders must make reasonable allowances, including for the nature and location of the site, and provide documentation showing actual costs after it is received.

As contract wording and circumstances may vary, you should obtain independent legal advice before signing. The practical principle is simple: an allowance should be visible, reasonable and supported—not treated as a convenient placeholder.

How to reduce unresolved allowances

Selections made before contract can convert many prime cost allowances into specified products. A coordinated schedule should record manufacturer, model, finish, quantity and supply responsibility. For provisional sums, further investigation may narrow uncertainty: soil reports, service locating, opening-up works, engineering design, trade inspections and early subcontractor input can all help.

Some unknowns cannot sensibly be eliminated. In those cases, the allowance should be based on the best available evidence, and the project budget should retain an appropriate contingency outside the contract.

Questions to ask before signing your contract

Ask why each allowance remains unresolved and what would be required to firm it up. Request the quantity and rate assumptions. Confirm which associated costs and margins apply and how savings or overruns will be documented. Ask when the relevant selection or investigation must be completed to avoid delay.

At Nine in Six Builders, the goal is to minimise unresolved allowances through timely selections, investigation and coordination. Where an allowance is necessary, we aim to make its basis clear so you can understand both the current contract figure and the remaining exposure.