Understanding Building Contract Costs

Understanding Building Contract Costs

PRIME COSTS + PROVISIONAL SUMS = ALLOWANCES

Many of our clients come to us wanting to compare apples with apples, but are often confused by how building costs are presented. This can make it difficult to accurately compare quotes.

Let’s be honest—we all want to get the most value for our money. But if you’re not comparing the same product, level of workmanship, inclusions, and design, it’s impossible to identify the best option. In some cases, costs may even appear hidden or unclear within the contract as “allowances.”

For example, if you were presented with a $20,000 earthworks allowance for a block advertised as “ready to build”… you’d probably have a few questions—and rightly so.

So, let’s break down the two key types of allowances you’ll see in building contracts: Prime Costs (PC) and Provisional Sums (PS).

What Are Allowances?

Most building contracts are described as fixed-price contracts. However, the final contract price can change due to fluctuations in PC and PS items.

Understanding these allowances is essential to avoid unexpected costs during your build.

What is a Prime Cost (PC)?

A Prime Cost (PC) item is an allowance for the supply of a specific item—such as tiles, tapware, doors, or bathroom fittings—where the exact product hasn’t yet been selected at the time of signing the contract.

The builder includes an estimated amount for these items. Under the Home Building Contracts Act (1991), this estimate must be reasonable and not understated.

Example:
If your contract includes a $440 allowance for a door, but you later choose a door that costs $500, you will need to pay the $60 difference.

👉 If your selections exceed the PC allowance, your contract price will increase.

What is a Provisional Sum (PS)?

A Provisional Sum (PS) is an allowance for work or materials where the full scope cannot be accurately determined at the time of signing the contract.

This is commonly used for site works, where conditions below the surface are unknown.

While builders must take reasonable steps to estimate these costs accurately, unforeseen issues can arise.

Example:
A site may appear clean and sandy, suggesting minimal preparation is required. However, once work begins, hidden limestone, rock, or tree roots may be uncovered—resulting in additional costs.

👉 If actual costs exceed the provisional sum, the contract price will increase accordingly.

Why This Matters

PC and PS items are often the reason two quotes that look similar on the surface can differ significantly in reality.

Lower allowances may make a quote appear cheaper—but can lead to higher costs later.

That’s why it’s critical to:

Understand what’s included in your contract
Check whether allowances are realistic
Ask questions if something seems unclear

Our Approach at White Building Co

At White Building Co, we understand that things don’t always go exactly to plan. That’s why we put in the work upfront to ensure your contract price is as accurate and realistic as possible.

We encourage our clients to work through selection costs early—like tiles, doors, and fixtures—so PC allowances are aligned with expectations.

We also recommend allowing a financial buffer in your budget to cover: