Unlike a variation, PC and PS are adjustments to a contract. If you want a water-tight contract, it is better to have as little PC and PS as possible, making the builder carry all the risk of supplying the items.
If you want to share some of that risk, having an agreed PS or PC can work in your favour. A good example is site cut, where it is difficult to work out how much soil will excavate and cart off the excess soil due to dump location, and traffic conditions of the day.
This example shows the agreed PS allowance of $10,000 (GST inc) and the total cost to cut the site in 3 different scenarios: Work is done less than the allowance at $8000, work is done as per allowance of $10,000 and work is done for more than the allowance $12,000.
Where Prime Cost Items (PCs) and Provisional Sum (PS) allowances have to be shown in a tender or contract document, the amount shown should be inclusive of GST. e.g.:
- Tile allowance PC $35/m2 (inclusive of GST)
- Landscaping Provisional Sum $10,000 (inclusive of GST)