PS Sum and PC Sum in Building Construction
- Corey Brown
- Jan 29
- 5 min read
Updated: Feb 25
Introduction:
Embarking on a building project in New Zealand is an exciting endeavor, but navigating the intricacies of construction contracts can be daunting. Two terms you'll likely encounter are PS Sum (Provisional Sum) and PC Sum (Prime Cost Sum). Understanding these allowances is crucial for managing your budget and expectations. This guide breaks down PS Sum and PC Sum, their differences, and how they impact your rights as a homeowner in New Zealand.
Table of Contents:
What is a PS Sum? (Provisional Sum)
What is a PC Sum? (Prime Cost Sum)
PS Sum vs. PC Sum: Key Differences and Implications for NZ Homeowners
What is a PS Sum? (Provisional Sum)
A PS Sum is an estimated allowance included in your construction contract for work that is not yet fully defined or detailed. Think of it as a contingency for tasks where the specifics are uncertain at the time of signing.
Key Points for New Zealand Homeowners:
PS Sums provide flexibility to accommodate changes and unforeseen circumstances during the project.
Allows for decisions to be made with more accurate information as the project develops.
Helps in managing financial risks by setting aside a contingency for uncertain elements.
Flexibility and Change Orders: PS Sums are designed to accommodate changes. In New Zealand, the Building Act 2004 and the Consumer Guarantees Act 1993 provide some protections, but it's crucial to have clear documentation for any variations.
Example Scenario: The Unforeseen Foundation
Imagine a homeowner, let's call her Sarah, is building a new home. Her contract includes a PS Sum for "foundation preparation, subject to soil testing." The initial soil test indicated relatively stable ground, and a moderate PS Sum was allocated.
However, during excavation, the builders discovered a previously undetected layer of soft clay. This required significantly more extensive and costly foundation work, including deeper footings and specialized drainage.
The Issue: Sarah was surprised by the substantial increase in the foundation cost, far exceeding the original PS Sum. She felt the builder was taking advantage of her.
The Reality:
PS Sum Purpose: The PS Sum was intended to cover potential variations in foundation work, acknowledging the inherent uncertainty of ground conditions.
Unforeseen Circumstances: The unexpected clay layer was a genuine unforeseen circumstance, supported by the builder's detailed site investigation and geotechnical reports.
Documentation is Key: The builder provided Sarah with:
Detailed soil test results.
Photographic evidence of the clay layer.
Revised foundation plans and engineering calculations.
A comprehensive breakdown of the additional costs, including labor, materials, and equipment.
Homeowners rights:
The homeowner has the right to see all documentation.
The homeowner has the right to get a second opinion from a geo tech engineer, at their own cost.
The builder must provide realistic estimates.
What Sarah Should Have Done (and What You Can Learn):
Understand the Risks: Recognize that PS Sums are designed for uncertainty and that costs can vary.
Ask Questions: Clarify the potential risks and how they will be managed.
Review Documentation: Carefully review all documentation provided by the builder.
Seek Independent Advice: If unsure, consult a building professional or engineer for a second opinion.
Maintain Communication: Keep open communication with the builder throughout the process.
The Takeaway:
This example highlights the importance of:
Clear Contract Clauses: Ensuring PS Sums are clearly defined, including the potential for variations.
Thorough Site Investigations: Conducting comprehensive site investigations to minimize unforeseen circumstances.
Detailed Documentation: Maintaining accurate and detailed records of all work and costs.
Open Communication: Fostering transparent communication between homeowners and builders.
Your Rights:
Ensure the contract clearly states how PS Sums will be managed, including how variations will be priced and approved.
You have the right to request detailed breakdowns of how PS Sums are spent.
The Fair Trading Act 1986 protects you from misleading or deceptive conduct regarding PS Sums.
The contrator must provide a realistic estimate, and not deliberatly low ball the PS sum.
Potential Issues:
Budget Uncertainty: Since PS Sums are provisional, the final cost may vary, leading to potential budget overruns.
Potential for Disputes: Differences in interpretation of what is covered under a PS Sum can lead to disputes between parties.
Increased Administration: Requires ongoing monitoring and adjustments, adding to the administrative workload.
What is a PC Sum? (Prime Cost Sum)
A PC Sum is a cost allowance for the supply of specific materials or fixtures that haven't been selected when the contract is signed. It covers the cost of purchasing these items, but typically not installation.
Key Points for New Zealand Homeowners:
PC Sums provide a clear allowance for specific items, helping to control costs and manage budgets.
Allows clients to make choices about materials and fixtures during the project without being constrained by initial specifications.
Clear definition of costs associated with materials helps in contract management and financial planning.
Material Selection: PC Sums give you flexibility in choosing materials, but you're responsible for staying within the allocated budget.
Examples: "PC Sum for kitchen appliances, to be selected from a specified supplier.", "PC Sum for bathroom fixtures, including tapware and showerheads.", "PC Sum for tiles, to be chosen by the client."
Your Rights:
You have the right to choose materials within the PC Sum allowance.
Ensure the contract specifies the quality and standards expected for materials.
Ensure the supplier that the PC sum is for is a reputable supplier, and that the warrenties of the product are acceptable.
Always get written confirmation of the items you have selected and the price.
Potential Issues:
Budget Variability: The final cost of materials may differ from the PC Sum, leading to budget adjustments.
Exclusion of Installation Costs: Only covers the cost of materials, so installation costs must be managed separately.
Potential for Quality Issues: If the PC Sum is set too low, it may result in the selection of lower-quality materials to stay within budget.
PS Sum vs. PC Sum: Key Differences and Implications for NZ Homeowners
Feature | PS Sum (Provisional Sum) | C SUM (Prime Cost Sum) |
Scope | Undefined work or tasks | Specific materials or fixtures |
Flexibility | High flexibility for changes | Flexibility in material selection |
Cost Inclusion | Labor and materials | Materials only |
Budget Impact | Higher potential for budget variation | Potential for material cost variations |
NZ Legal Considerations | Building Act 2004, Fair Trading Act 1986, Consumer Guarantees Act 1993 | Fair Trading Act 1986, Consumer Guarantees Act 1993 |
Navigating PS Sums and PC Sums in Your Contract
Detailed Specifications: Ensure your contract includes detailed specifications for both PS Sums and PC Sums.
Variation Clauses: Understand the process for variations and how they will be priced.
Documentation: Keep meticulous records of all selections, approvals, and variations.
Communication: Maintain open communication with your contractor.
Independent Advice: If you're unsure about any aspect of your contract, seek advice from a qualified building professional or legal advisor in New Zealand.
Conclusion:
PS Sums and PC Sums are essential tools in construction contracts, offering flexibility and control. For New Zealand homeowners, understanding these allowances is crucial for a successful project. By being informed about your rights and responsibilities, you can navigate your building project with confidence. Remember, clear communication, detailed documentation, and seeking professional advice when needed are key to a smooth and successful building experience in New Zealand.
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