From updating software to signing up for a new account, it is not surprising that many of us tend to skim through the ‘Fine Print’ in agreements, especially when you have pages of seemingly dull and incomprehensible text to get through!
However, when it comes to signing your Building Contract, there is no room for complacency. Afterall, it is your very own Home! Understanding your contract and pricing components is crucial for a smooth building process and to avoid budget blowouts. Not sure about Builders Jargon? Let us explain the 3 Key Pricing Components:
- Prime Cost (PC)
This refers to the cost allowance that is made for the supply of certain materials to be selected by the client, such as plumbing fixtures and tapware, tiles, or appliances. Prime Costs are usually included when the builder may have insufficient information on client’s selection (preference) at this point to provide a fixed price quotation. The PC is subject to change depending on final selection and is for the cost of the item only (excluding installation costs). It is important that PCs are realistic and meet the expectations of quality in line with the build project.
- Provisional Sum (PS)
Provisional Sums are usually provided for works and activities that are unable to be accurately quantified at the time of pricing or quoting the project. For example, groundworks and excavations are common PS items as they depend on ground conditions. In major excavations the builder will usually propose a PS. Similar to the PC, it is subject to change depending on the final cost of having the task completed. However, the main difference between a Prime Cost and a Provisional Sum is that the Provisional Sum will allow for both materials required and labour.
- Fixed Price
Finally, an easy term – Fixed Price means literally what it says – a Price that is fixed and is not subject to change. This means the builder is unable to charge extra if their estimation ends up being incorrect. As work proceeds under contract, the builder must supply everything necessary for the proper completion of the works at the Fixed Price.
Ideally, it is always in your best interest to avoid PC and PS items as much as possible, while aiming for mostly Fixed Prices. However, sometimes it is unavoidable to include several PCs and PSs and, in this case, the builder will need to make realistic and reasonable allowances so that they are as close to the estimation as possible, i.e. final selections (in PC cases) or the actual costs (in PS case).
The best approach to preventing budget blowouts and avoiding unpleasant surprises during construction, is for the builder and client to spend quality time clearly discussing as much detail as possible during the pricing/quotation phase. From there the builder can then provide a more accurate quote with Fixed Price items that would have been PC or PS allowances otherwise.
Smart Reno is known as Brisbane’s trusted home renovations & builders, with a clear and concise process which minimises PC and PS allowances to your building proposal and therefore can provide Fixed Price quotations in most cases. Contact SmartReno today to discuss how we can help you with your proposed build project. Call 0406 616 690 or click here to book an appointment.