PC and PS items: what the difference actually costs you
Some costs cannot be priced properly at contract stage, because nobody has chosen the thing yet. The client has not picked the tiles, the tapware or the kitchen. Rather than hold up the contract, you carry an allowance and adjust it later.
There are two kinds of allowance, they are not interchangeable, and the difference is who pays for the labour.
PC — prime cost
A prime cost item is an allowance to supply an item only. It does not include installing it.
A PC allowance for tiles buys tiles. It does not lay them. The tiler’s labour is a separate item in your estimate, and if you have not allowed for it separately, you are laying those tiles for nothing.
This is the one that catches people out, because on a schedule of allowances a tile PC sum and a kitchen PS sum look like the same kind of line. They are not.
PS — provisional sum
A provisional sum is an allowance for work where the quantity or the scope is not yet known, and it includes both the material and the labour.
Excavation is the classic one: nobody knows exactly what is under the ground until it is opened up. Kitchen cabinetry is another — supplied and installed, but not yet chosen.
What the rules expect of you
Rules differ by state, so check yours, but the principles are consistent across Australia:
- The allowance has to be realistic. It must be enough to buy something a reasonable person would expect in a house of that value. Nobody accepts a $70 mixer in a $1.2 million house, and an allowance set that low is a dispute you have scheduled for later.
- Trade discounts belong to the client. If you buy the item cheaper, the saving is theirs, not yours.
- Show the invoices if asked. Allowances are adjusted on actual cost, so the actual cost has to be visible.
- Tell them before they are committed. If a selection blows the allowance, the client needs to know before the order goes in, not on the final claim.
On top of the allowance itself, your margin and overheads still apply, the same as on any other item.
Adjusting them, and when the money moves
An allowance is adjusted against the contract sum when the real cost is known — up or down, as a variation.
The sequence that keeps you out of trouble:
- The client makes the selection.
- You price it and issue the variation in writing, before the work starts.
- They sign it.
- If it is a debit — the selection costs more than the allowance — it is payable when signed, because you are about to pay a deposit on it.
- If it is a credit — cheaper than the allowance — it comes back to them at the relevant progress claim, not the day they sign.
That last split is not builders being difficult. Money goes out to suppliers ahead of the claim, so a credit refunded immediately is a hole in your cash flow that lasts until the stage is claimed.
Keeping track of them
The danger with allowances is not the arithmetic, it is that they sit quietly in the contract for months. Ten allowances, two of them already over, and nobody has told the client.
In SmarteBuild the adjustment runs through Variations: priced, sent to the client, approved with a typed name, and applied back to the estimate — so the allowance and its final cost end up in the same place rather than in an email. What is still outstanding stays visible on the job instead of surfacing at handover.
SmarteBuild is Australian estimating and job management software for residential builders. Try it free for 30 days — no credit card, every module unlocked.