Provisional Sum - How to Deal with them

[wealth]

I have gotten prices back from several builders on plans which I have drawn up.
The construction cost for the building itself is fairly similar across all builders as I have also specified the specs in the home.

However, when looking through the provisional sum. there are some quite large variances. I've spoken to them and they all mention its based on their experience and they have formulas etc etc etc to work it.

My concern is, if I choose the cheapest overall builder, but then his provisional sums may be underestimated and the final price may be the highest after construction.

I've already tried to get them to reduce alot of the provisional sums, but not all and its still a fairly significant amount of money involved.

Can someone please advise how they manage this to reduce this risk?

 

[westminster]

In the HIA contract there is usually a clause which says how much over the builder can go from a Provisional Sum. After that they have to suck it up.

Check what it is for each builder, negotiate something reasonable - do not allow anything over 25%. The builders with a cheaper PS may have a higher amount in there.

 

[boeman]

Excerpt from the HIA info:
The builder is required to ensure under the Home Building Contracts Act 1991 (WA) that the allowance for each PS and PC are calculated with reasonable care and skill taking account of all the information available to the builder at the date the contract is made including the nature and location of the building site.

It is in the builders interest to be accurate, as if it is over it causes huge headaches for them.

Can I ask which item specifically worries you most? Earthworks?

 

[wealth]

Hi, thanks for all response.
As per Westminister's comment, I did check but did not find any limit on the PS. All I found was what Boeman said and that it needs to be reasonable.

The problem with being a reasonable guess is that it becomes very subjective and if there was any argument, the builder can start playing games and put up reasons why it was underestimated. Not really sure if I really want to go through all the hassle with this.

The items which concern me are earthworks and storm water disposal.
Even items which I thought was pretty straight forward like water, power run-in etc are 25% out.

 

[chindonly]

From my previous projects, I thought PC sums were just that - a best guest allowance, but no real responsibility on behalf of the builder.

If it goes over or under, the owner wears it.

We normally get advice from our project managers and architects as to whether they feel it is a reasonable amount.

This is where your contingency amount comes in - I suggest 10% of total build cost.

 

[Perp]

From my previous projects, I thought PC sums were just that - a best guest allowance, but no real responsibility on behalf of the builder.

If it goes over or under, the owner wears it.

They're different.

PC = prime cost - usually for fixtures and fittings, eg taps, baths, tiles, carpet, etc. - you pay the builder what it actually costs them, the amount in the contract is a "guess" based on a certain level of finish - i.e. it varies depending on what finishes the customer chooses

PS = provisional sum - usually for items that can't be fully known until they're done, e.g. earthworks, sometimes footings, etc. - varies depending on what builders actually find during the build.