A prime cost (PC) sum is an Allowance in the contract for goods, materials or specialist work that will be supplied by a Supplier or Subcontractor selected by the Client or its design team.
The contractor adds it to the contract sum, buys the item at the actual price, and the Final Account replaces the allowance with the real cost. The contractor's profit and attendance on the item are usually priced separately in the tender.
Worked example
The bills include a PC sum of £18,000 for kitchen units, plus 10% for the contractor's profit and £600 for attendance. The client selects a supplier whose invoice comes to £21,300.
| Item | £ |
|---|---|
| PC sum in the contract | 18,000 |
| Actual cost of the units | 21,300 |
| Adjustment before profit | 3,300 |
| Profit at 10% on the adjustment | 330 |
| Net addition to the contract sum | 3,630 |
Whether profit is added to the adjustment, or stays fixed at the tendered figure, depends on the contract. Read the tender build-up before assuming either.
PC sums in the cost report
A PC sum makes the contract value and the budget move together. Until the item is bought, hold it in the budget at the allowance. Once the Purchase Order (PO) is placed, replace the allowance with the order value and report the difference as a movement the client has to pay.
Good cost reporting separates the PC items from the main package so a late PC adjustment does not hide an overspend elsewhere. Check that the supplier's order is raised in your name, and that any discount on the item is passed on if the contract requires it.
JCT contracts also use the idea of provisional sums for named specialists, and the exact mechanics depend on the form and edition, so check the one you are using.
Related terms
Provisional Sum, Allowance, Bill of Quantities (BoQ), Final Account, Variation.
Planyard's purchase orders let you replace a PC allowance with the real order value as soon as the supplier is confirmed, so the committed cost is visible straight away.
