Are You Confused By The Jargon Builders Use?

Builders Jargon

Builders can be intimidating with the amount of industry jargon and acronyms they use on a daily basis. We all do it. In all of our different industries, there are certain terms you just know and use.

 

But how are you going to know exactly what’s going on with your new home? If you don’t know what certain words or phrases mean in your building contract then you’re not alone!

In this article, you’ll learn exactly what each of the most common terms used in building actually mean.

 

The Most Common Terms Used In Building

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 or it is simply not possible to include a quote due to factors that are unknown at the time of the contract signing.

The thing about PS’s is that they are estimates which mean they often change when the final cost of the tasks are calculated. Be wary if your builder has filled your building contract with PS’s as you could find your contract price increasing dramatically throughout the build.

If your builder is experienced and has reviewed your drawings, there shouldn’t be any need for provisional sums. Your builder will generally know exactly what’s required.

Builders who rely on using provisional sums in their quotes are typically disorganised and are not prepared to put in the time to quote your job properly. It’s a big red flag and the chances are you’ll be taken advantage of.

Typically they include unrealistically low provisional sum allowances in their quote so that their price appears much lower than their competitors – in the hope you’ll make a decision purely based on the price.

These builders know that if there was any error in the final costs, they will be passed directly onto you, the client which means they have no risk or responsibility.

 

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. Essentially a dollar budget where the final selection of those items is still to be confirmed.

Note that the allowance for a Prime Cost item only covers the supply of that item. Any labour associated with the installation of that item should either be included in the contract or listed separately as a provisional sum.

Just like provisional sums, prime cost items do change depending on your final selection and therefore can incur additional costs, so in order to minimise your exposure to budget overruns, make your selection choices prior to signing a contract where possible.

 

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 are 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.

For a detailed preliminary building agreement, you can expect to pay a custom home builder between $5k-25k depending on the size of your project.

 

Extension Of Time (EOT)

 

An Extension of Time is simply the amount of days that are added to your building contract. These usually appear once you add a variation to your contract that will delay the completion or it can be due to inclement weather or any other reason outside of the builder’s control. EOT’s simply extend the contracted completion date of your new home that was recorded in your building contract.

 

Variations

 

Variations can get introduced for many different reasons. The most popular reason for a variation being raised is when you change your mind on something after the contract has been signed.Variations

Variations document what has been changed along with any additional costs that relate to labour, materials and administration fees.

You could also incur variations when any unforeseen work arises. This is typical of projects doing renovations and/or extensions. If there was no way of knowing about the issues at the time of quoting your project, it’s simply an unforeseen variation that needs to be raised so the builder can do the necessary work.

Each time a variation is raised, these typically come with an extension of time attached to them. Make sure you are happy with everything in your contract before signing it to avoid changing your mind and causing serious delays on your project.

 

Builders Margin

 

Simply put, builder’s margin is the amount of profit added by the builder to cover their expenses. Typically you’ll see a ‘builder’s margin’ on any variations raised so that the builder can complete the work.

 

Rock Clause

 

Finally, a rock clause is something you’ll find in most building contracts. It is there to protect your builder from unfortunate unforeseen circumstances like hitting rock during the excavation. The rock clause applies to fixed price contracts so be aware. You can’t avoid it but you can certainly be prepared for it.

Make sure you refer back to this glossary of building terms when you’re reading through your builder’s documentation. Don’t be afraid to ask your chosen custom home builder either. If it’s not clear, ask more questions. If it’s still not clear, then find another builder that will help you to understand.

Remember, better information leads to better decisions. So download the 7 Things You Must Know Before Designing A New Home by clicking on the link below.

Download 7 Things You Must Know Before Designing A New Home

 

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