What Is a Prime Cost (PC) Item?
A prime cost (PC) item is an allowance in a building contract for supplying a specific product that the client hasn’t yet selected — common examples are tapware, tiles, a cooktop or light fittings. The contract carries an estimated supply cost for the item, which is adjusted to the actual purchase price once the client makes their choice.
Key takeaways
- A PC item is a supply-only allowance for a specific, identifiable product the client hasn’t chosen yet — not a placeholder for undefined work.
- Installation labour is normally priced separately in the contract, so a change to the PC item affects the supply cost, not the install price.
- The allowance is reconciled to the actual purchase price once the product is selected, with any difference added to or deducted from the contract price.
- A well-drafted PC schedule states whether the figure is trade price or retail, and whether freight, wastage and GST are included.
- Setting realistic allowances and clear selection deadlines up front avoids the most common source of PC item disputes.
What is a prime cost (PC) item?
A prime cost item is an allowance built into a fixed-price building contract for supplying a specific product that the client hasn’t yet chosen — tapware, tiles, a cooktop, light fittings or door hardware are the classic examples. The design intent is already fixed (there will be a tap here, a tile there), but the exact product and its price are a client style choice made later.
Unlike a provisional sum, a PC item usually covers the supply of the product only — the labour to install it is priced separately elsewhere in the contract. That narrower scope is what makes PC items relatively straightforward to reconcile: it’s largely a matter of comparing the allowance to a supplier invoice, rather than reconstructing the cost of a whole undefined scope of work.
PC items are used for finishing selections precisely because they let a contract carry a firm, fixed overall price while still leaving room for the client to choose their own tapware, tiles or appliances later in the job, without renegotiating the whole contract.
In plain terms
A PC item is a placeholder for a specific product, not for unknown work. The contract already knows exactly what’s being installed and where — it just doesn’t yet know which exact tap or tile the client will pick, or what that pick will cost.
What’s typically covered by a prime cost item
PC items cluster around the visible finishing selections that clients naturally want to choose for themselves, rather than have specified for them.
- Tapware and mixers throughout the kitchen and bathrooms
- Floor and wall tiles
- Bathroom fixtures — basins, baths and toilet suites
- Kitchen appliances — cooktop, oven and rangehood
- Door and cabinet hardware
- Light fittings and switch plates
How a prime cost item is structured in the contract
A properly drafted PC schedule lists each item with a description, a supply-only dollar allowance, and often a nominated supplier or showroom range the client can select from. It should also state clearly whether the allowance is a trade price or a retail price, because that single detail materially changes what the client can actually afford within it.
What a PC item usually excludes matters just as much as what it includes: installation labour, and often freight, delivery and wastage or cutting allowances, unless the schedule specifically says otherwise. Clients who assume a PC allowance is “all in” are the most common source of PC item disputes.
How a prime cost item is reconciled
Once the client makes their selection, the builder confirms the actual purchase price with the supplier and reconciles it against the PC allowance, adjusting the contract price by the difference — up if the chosen product costs more, down if it costs less.
Because the scope is narrow — a defined product, not a whole undefined trade — this reconciliation is usually quick: the builder simply presents the supplier quote or invoice against the original allowance for the client to sign off before ordering.
| Item | PC allowance | Actual purchase price | Adjustment |
|---|---|---|---|
| Tapware allowance | $1,200 | $1,650 | +$450 |
| Floor tiles allowance | $4,500 | $3,900 | -$600 |
| Kitchen appliances allowance | $6,000 | $6,000 | $0 |
How prime cost items affect the final contract price
As with provisional sums, the contract price stated at signing is not the final price the client pays — it’s only settled once every PC item has been reconciled to the actual purchase price, typically confirmed as the job approaches practical completion.
Most standard form contracts also specify whether the builder’s margin applies to the adjustment, on top of the difference in purchase price, so it pays to check the wording before assuming either way.
Who manages prime cost item selections
The client chooses the product, usually from a nominated supplier or showroom range, within a timeframe set by the builder’s program. The builder then confirms the actual cost with the supplier and gets the client’s written approval before ordering, to avoid any dispute later about what was agreed.
Missed selection deadlines are one of the more common causes of program delay on a residential job, since trades further down the schedule — tilers, plumbers, electricians — are often waiting on the client’s decision before they can proceed.
Prime cost item vs provisional sum vs allowance
These terms are related but describe different kinds of uncertainty in a contract price:
- PC item vs provisional sum — a PC item is supply-only for a specific, identifiable product; a provisional sum typically covers both supply and installation for work or scope that isn’t fully designed at all, not just an undecided product.
- PC item vs allowance — “allowance” is often used loosely in conversation; in a formal contract, PC items and provisional sums are the two defined types of allowance, each with its own reconciliation rules.
- PC item vs variation — paying the difference for a different product within the same PC schedule isn’t technically a variation; asking for extra work beyond installing the chosen product, like additional tiled area, would be.
Common mistakes with prime cost items
Most PC item disputes are avoidable and stem from the allowance being unrealistic or ambiguous rather than genuine disagreement about the product itself.
- Setting the allowance unrealistically low to make the headline contract price look more competitive, guaranteeing it will be exceeded at selection time
- Forgetting to price installation labour separately, so the client is surprised it isn’t covered by the PC allowance
- No allowance for freight, wastage or cutting and matching, particularly on tiles
- Not confirming the actual purchase price with the client in writing before ordering
- Missing selection deadlines, which delays trades further down the construction program
How My Trade Hub helps with prime cost items
My Trade Hub’s estimation engine flags prime cost items separately within the Bill of Quantities it generates from your plans, so a client, an estimator or an assessor can see at a glance which lines are locked-in measured quantities and which are still subject to a product choice.
Because the whole BOQ — PC schedule included — is generated straight from the drawings rather than built up by hand, it’s ready to attach to a quote or tender 60-75% faster than manual estimation, and every allowance stays editable the moment a client locks in their selection.
Frequently asked questions
What happens if a prime cost item costs more than the allowance?
The difference is added to the contract price. If the chosen product costs less than the allowance, the price is usually reduced. The adjustment is handled as part of the standard PC reconciliation process under most standard form contracts.
Does a PC item include installation?
Usually not. A prime cost item generally covers the supply of the product only — the labour to install it is priced separately elsewhere in the contract, so check both figures if you want the full cost of an item.
Who chooses the product for a prime cost item?
The client does, usually from a nominated supplier or showroom range within a timeframe set by the builder’s program. The builder then confirms the actual cost and gets written approval before ordering.
What is the difference between a PC item and a provisional sum?
A PC item is a supply-only allowance for a specific, identifiable product, like tapware or tiles. A provisional sum usually covers both supply and installation for work that isn’t fully designed or specified at all, which is a broader kind of uncertainty.
Can a builder change the PC allowance after the contract is signed?
Generally not unilaterally — the allowance is fixed in the contract. What changes is the reconciled figure once the client’s actual selection is priced, which is a normal adjustment rather than a change to the agreed allowance itself.
Are prime cost items included in the total contract price?
Yes — the allowance forms part of the contract sum at signing, but it’s only an estimate for that item. The true final price for each PC item is only confirmed once the client’s selection has been priced and reconciled.
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