A prime cost item is an allowance for something the client will choose after signing, like tiles or an oven. A provisional sum is an estimate for work you cannot price firmly yet, like excavation. Both are placeholders, and both can end in an argument if the client does not understand them before the first claim.
The rules differ by state. This article uses the Victorian, Queensland and NSW regulators’ own pages and says which is which. It is general information, not legal advice.
Provisional sums and prime cost items in plain words
Prime cost item (PC). Victoria’s regulator defines it as a fitting that is part of the contract, but the specific item has not been selected or its price is not known when the contract is entered into. The builder needs to make a reasonable allowance for the supply and delivery of the item (Consumer Affairs Victoria definitions). Queensland’s regulator gives fixtures and fittings such as tiling, kitchen appliances and bathroom fittings as examples, and NSW describes them as items that cannot be costed exactly before work begins (NSW Government on contracts).
Provisional sum (PS). Victoria defines it as a reasonable estimate of the cost of certain work where the builder, after making reasonable enquiries, cannot give a definite price when the contract is signed. Its example is supply and installation of air conditioning. Queensland’s examples are contracted services such as rock or termite removal, and it says that where a larger contract includes allowances for these items, the schedule must state them and they will be calculated with reasonable care and skill (QBCC on contracts and agreement types).
The simple difference: a PC is about something the client will choose. A PS is about something you do not yet know.
How each one adjusts at the end
Both settle against what really happens. How exactly depends on the wording of your contract, so read it, but the usual working is this. Say you allowed $20 per square metre for tiles (an example figure):
- If the client picks tiles at $30 per square metre, the difference is added to the price.
- If provisional sum work, such as excavation, costs more than the estimate, the increase is added.
- If either comes in under, the client gets the difference back.
- Your contract should also say whether your margin applies to the difference.
That works in both directions, which is worth saying to a nervous client. An allowance is not a charge. It is a holding figure, and the real invoice replaces it.
Why big allowances cause arguments
Consumer Affairs Victoria tells builders to specify as much as possible in the contract for a fixed total price, to avoid disputes. Allowances are where those disputes start, for a few reasons.
- Low allowances look cheap. A quote with a $3,000 allowance for a bathroom’s fittings looks better than a rival’s $9,000 until the client chooses what they actually want.
- Clients do not read them. The contract price on page one feels final. The allowance lines on page nine do not.
- Totals add up. One allowance that is out by a little is nothing. Ten of them each out by a little is a different number.
When allowances are big, so is the gap between the quote and the final price. That is what the client remembers.
What to settle before you quote
A checklist for each job:
- List every item the client has not chosen. Each one is a PC candidate.
- List every piece of work you cannot price without more information. Each is a PS candidate. Think rock, hidden services, access, and demolition surprises.
- For each PC, put in a realistic allowance for the quality level the client has described. Not the cheapest product that makes the total look good.
- For each PS, say what it covers and does not cover.
- Say how overruns and savings are handled and how the client approves a choice.
- Label them clearly. Victoria’s checklist says fixtures and fittings not specifically identified, or with an unknown price, must be clearly stated as provisional sum or prime cost items.
- Check your state’s rules on contract content, including any rule on explaining a large change to a provisional sum. We could not confirm one from a regulator page, so ask your regulator.
The Victorian rules above come from the Consumer Affairs Victoria checklist. Other states set their own contract content rules, and Victoria’s domestic building contract laws were amended in 2025, with the new laws taking effect by 1 December 2026, so check the current version. This is general information, not legal advice: check with your regulator or a solicitor for your situation.
How to say it to the client
Say it in one breath, at the quote meeting, in these words or close to them:
Some items in this quote are allowances, because we do not know the final cost yet. The tiles are one. I have allowed $X per square metre. If you choose something dearer, the difference is added. If you choose cheaper, you get the difference back. I will give you the actual price before anything is ordered.
Then put the same sentence in writing. The client who hears it twice, once spoken and once written, rarely feels surprised at claim time. The surprise comes from the client who hears it for the first time with an invoice in hand.
Paid early work as a way to firm up the sums
Allowances shrink when you know more. A site survey, soil test and engineer’s advice can turn a provisional sum for footings into a firm price. A selections meeting with the client can turn a dozen PC items into chosen products with real prices.
That is what a paid early stage buys. The Queensland regulator describes a preliminary agreement as one made before the building contract so the contractor can be paid upfront for early work such as designs, soil tests and contour surveys (QBCC on agreement types). The fewer unknowns left at contract time, the fewer sums you need. Read charging for preliminary work, and if the unknowns are too big to allow for, compare cost plus and fixed price contracts. Our pre-construction page covers the paid early stage.
Common questions
What is the difference between a prime cost item and a provisional sum?
A prime cost item is an allowance for something the client will choose after signing. A provisional sum is an estimate for work that cannot be priced firmly yet.
Who pays if a provisional sum runs over?
Usually the client pays the increase and gets any saving back, but your contract wording decides it. Write it down and explain it before signing.
Can I put a large provisional sum in a contract to win the job?
You can, but it invites disputes. Consumer Affairs Victoria tells builders to specify as much as possible in the contract for a fixed total price.
Do these rules apply in New Zealand?
The regulator pages used here are Australian. For New Zealand, check the official building guidance and your contract type.