Has anyone here ever had any luck with getting these builders to honor their...

Interesting to find this out , we’ve been looking at building ourselves so its good to have some warning on what can happen

How did they leverage the price if they had guaranteed it?

A provisional sum is an allowance (or best guess), usually estimated by a cost consultant, that is inserted into a documents for a specific element of the works that is not yet defined in enough detail for an accurate price. It is a tactic some Franchises use to seem more cost effective. Good luck in your pursuit of claim, however it may prove difficult to get a decision in your favour.

Hi Brenda, I’ve written on the subject of Prime Cost (PC) and Provisional Sums/Quantities before, so I’ll try to keep this brief. There is nothing wrong or dishonest in principle about the use of PC sums, if they’re used in the correct sense. In fact in theory they should be to the benefit of the client, because they should be used for things like kitchens, carpets, electrical appliances etc. So a sum is allowed for a ‘reasonable’ or average standard or quality, but the client can choose to pay more (or less) for something of a higher or lower standard or quality. So you have flexibility, rather than being forced to take only the one chosen by the builder. But of course this means you must do your homework, and find out before signing the Contract what you’re going to get for the amount allowed. The point is, it should be the client who gets to choose whether to pay more. Where these can be used to take advantage of naive clients is if the client lets the builder put in a PC sum for example for something like electrical work, and the client takes the builder’s word that this is adequate. Then later the client realises it’s only enough for say one light and one power outlet in each room. Enough in theory, but of course not what the client was expecting! But I think you may be referring to Provisional Sums (often mistakenly referred to by people in the building trade as PC sums, because they’re builders, not experts in contract law). These should only be used for things like earthworks and foundations, where the quantity (and therefore cost) cannot be exactly predicted until the work starts, and the engineer/Council have assessed the situation. Of course if you sign the final contract before the detailed design has been finalised, and Building Consent obtained etc, then the number of things that genuinely fall into the category of unknown, and therefore difficult to accurately cost, may be much higher. At the end of the day, the more accurately and completely the soil conditions are investigated (a truism in construction, money spent on site investigation is never wasted), and the building designed, and the more questions the client asks, the more likely you are to complete within your expected budget. Having said all that, even major government projects, designed and supervised by professional engineers, (with specifications and drawings 50mm thick) often have a 10% contingency allowance for unforeseen costs. So in my opinion any client who starts a build without having at least 110% of the contract price available is taking a great risk.

The head franchisor in this business charges franchisees like a wounded bull. I have associates in the industry who have left one of these businesses due to unethical charging practices they could not condone. PC sums are a way to con people into accepting a price leaving it open for the group home builder to charge anything they want to a degree. PC sums should be clarified in the contract. Any variations to the build must be accepted as per contract by the customer or else it cannot be charged for. I know of one Auckland housing company doing this as a norm to incur major extras for their customers. Unfortunately for them their name has become mud and I would not hesitate in suggesting they may not be around in the future. Just tars our industry with bad taste again and you know it’s just that the construction industry has allowed a large number of insincere and unworthy individuals to enter into it and apply fraudulent practices believing they can do what they like to people. Network people and tell all of their behaviour. It will come around to bite them in the butt but it will also make the head franchisor step up and take note. Most head franchisors don’t give two hoots of these practices. In fact they condone them.

I had the same experience with Signature Auckland North Shore. Tactic became very obvious once the contract was signed. They include a large number of PC sum items which they over ran significantly on almost all items. It has been stated many times on this forum – you need to challenge hard to minimize PC Sum items. They are very good at convincing the inexperienced first home builder that they are an essential part of the contract but in my view they are way over used to their advantage in locking you in to a attractively priced contract. Then before you know it the project cost has blown out significantly and by that stage you are in to deep to do anything about it.