Builders can be confusing with their terminology and industry talk they use on a daily basis.
Building is like any other industry, there is a lot of terminology used and you can feel lost at times. Here are some terms that are often misunderstood, but do become very important when they appear in a building contract. Understanding the proper terms puts you on a level playing field with the builder when it comes time to consider quotes and signing contracts, helps reduce stress and eliminates budget blow-outs.
Below, we will explain what each of the most common terms used in the Building Industry actually mean.
Provisional Sum (PS): A Provisional Sum, more commonly known as a PS, is an allowance that the builder has made to complete a task. It covers labour only or labour and materials. They are useful when the final selections have not been completed at the time of signing the contract.
Prime Cost Item (PC): Much like a Provisional Sum, a prime cost item is a dollar figure allowance used in building quotes and contracts. It’s an allowance for materials such as appliances, sinks, taps etc. Note that the allowance for a Prime Cost item only covers the supply of that item. If possible make your selection choices prior to signing a contract.
Preliminary Building Agreement/Contract (PBA): A Preliminary Building Agreement or Preliminary Building Contract are also referred to as ‘pre-lims’ by builders. They are a pre-contract document that includes all of the tasks that need to be organised prior to signing a building contract. Engineering, soil tests and working drawings all need to be completed in order to produce a fixed price contract. A Professional builder will always start with a Preliminary Building Agreement before committing to a full building contract.
Extension Of Time (EOT): An Extension of Time is simply the amount of days that are added to your building contract.
Variations: Variations can get introduced for many different reasons. The most popular reason for a variation being added is when you change your mind on something after the contract has been signed.
Rock Clause: Finally, a rock clause is found on most building contracts. It is there to protect your builder from unfortunate unforeseen circumstances like hitting rock during the excavation.
To complete this article, make sure you understand, and you are happy with the proposal your builder has put together, for the construction of your new home.