Provisional sums and PC sums: what each one commits you to

NRM2 requires four things. Miss any of them and the sum is undefined, whatever the bill calls it.

1. 01The nature and construction of the work. What it is, in enough detail to picture it.
2. 02How and where it fits the building. Location and interface with other elements.
3. 03A quantity or scope indication. Extent, area, or a range.
4. 04Any constraints on sequence or timing. When it must happen relative to everything else.

A bill that says "Provisional sum (defined): drainage alterations, £15,000" and nothing more has not defined anything. The label does not do the work; the four items do.

With a defined sum the contractor is taken to have allowed for the work in its programme and its prelims, so expending it is not a surprise and brings no extra time. With an undefined sum the contractor was not able to plan for it, so the instruction is treated much like a variation and can carry both time and money.

NoteThis is why employers prefer everything defined and contractors read the four requirements carefully at tender. A sum labelled defined but lacking the information is worth querying before the tender goes in, not after the instruction lands.

1. 01The sum is removed from the contract. In full. It was never a price for anything.
2. 02An instruction is issued. Describing the work now that it can be described.
3. 03The work is valued. Using the variation valuation rules: contract rates, adjusted rates, fair rates, then dayworks.
4. 04The valuation replaces the sum. The account moves up or down by the difference.

The valuation is not capped by the allowance. A £10,000 provisional sum for work that turns out to cost £18,000 is valued at what the work is worth, and the account increases. The allowance was an estimate for cash-flow purposes, not a limit.

A prime cost sum is an allowance for goods or work that somebody else supplies: a nominated subcontractor, a nominated supplier, or an item the employer selects later. Sanitaryware, ironmongery, kitchens and lifts are common examples.

Around the PC sum the contractor prices two further items: profit, as a percentage, and attendance, being the cost of unloading, storing, providing access, scaffolding, power and general facilities to whoever does the work.

When the actual cost is known the PC sum is adjusted, and the profit percentage adjusts with it. Attendance usually does not, because the facilities were provided regardless of what the goods cost.

Pricing attendance at zero to look competitive means providing scaffolding, power and storage to somebody else’s subcontractor for nothing, for the length of their works.