PC sum and VO
Throughout any design and build journey there are two terms that will keep cropping up: PC sum and VO. Before you embark on your own design and build journey, it’s a good idea to get familiar with and understand how PC sums and VOs work.
PC sum is short for Prime Cost sum. Prime Cost sums are an estimated provision included in building contracts for the few areas of the build where it is not possible to provide a fixed cost at the time the contract is signed. The final costs may be over or under the provision included, but the PC sum should be the best possible estimate of costs based on contractors’ estimates, with professional advice and assessment. Any responsible builder will try to get this figure as precise as possible.
PC sums generally fall into two categories – site-related sums or items that have not yet been selected. An example of site-related PC sums is excavations and retaining walls, where actual costs cannot be finalised until the works have been completed. Kitchens and wardrobes are two good examples of PC sums for items that have not yet been selected. While house designs are already finalised when the contract is signed, final colour selections and interior design usually comes later. This allows clients the greatest flexibility to explore different options when deciding on those finishing touches. It’s the biggest advantage of the design and build process and helps the client achieve their vision. If a builder gets to know their client and has a good understanding of what they want to achieve, they’ll provide a reasonable and appropriate sum for these items in the contract. However, the actual costs will ultimately come down to the products and finishes that the client selects.
We once had a client who thought the PC in PC sum stood for personal choice. While technically incorrect, this perfectly describes the nature of a PC sum.
If you are concerned about any PC sum allowances, discuss them with your builder to make sure the amount is as realistic as possible before signing your contract.
The second term, VO, is an abbreviation of Variation Order. In most building contracts all prices except PC sums are fixed*, however, clients may want to make changes after the contract has been signed. In fact, this is very common in a design and build project. For example, a client may want to upgrade appliances to a newer model released after their contract was signed. The builder will work out the price difference and provide a new quote for the client to review and approve. In this situation, the approved difference in price and product becomes a VO.
The vast majority of variations and PC sums will result in an adjustment to the final contract price for your build, so it is important you understand these terms and the figures included when your building proposal is presented. Ask questions and seek clarification until you feel comfortable and confident about signing your contract.
*subject to contract terms and conditions
additional reading: Owners' care