Contract reconciliation (PC and PS allowances)

Contract reconciliation is the process of comparing each prime cost (PC) and provisional sum (PS) allowance in a building contract against the actual cost the builder incurred, then adjusting the contract price up or down for the difference. It is where the estimates written into the contract particulars at signing meet reality, and it is where most allowance disputes surface.

The mechanics are specific, and getting them wrong is the usual cause of the dispute:

• Where actual cost exceeds the allowance, the builder charges the excess plus a margin on the excess only. Under HIA contracts the margin defaults to 20% if no other rate is set in the schedule.
• Where actual cost is less than the allowance, the owner is credited the full saving at the next progress claim; the builder retains none of it.

The margin on the allowance itself is already built into the fixed contract price at signing, so it is not charged again at reconciliation. The classic mistake is charging the margin on the full actual cost rather than just the excess, which overcharges the owner. For example, on a $2,000 tapware allowance that comes in at $2,600, the builder charges the $600 excess plus 20% ($120), not 20% of the whole $2,600.

Reconcile against documented actual costs (supplier invoices), not estimates, and show the owner the workings. See allowances vs PC vs PS for the difference between the item types and PS items for the supply-plus-labour case.

Also known as: PC/PS reconciliation, allowance reconciliation, final account adjustment.

Category: Contracts / Cost and allowances.

Related

• Allowances vs PC vs PS

See also

• PS items
• PC sum (prime cost)
• HIA fixed-price contract
• Reading a building contract

References

• HIA: Prime cost and provisional sums, don’t forget your margin (verified 2026-05-09)
• NSW Fair Trading: Guide to home building contracts (verified 2026-05-09)

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Last updated: 2026-05-30. Verified: 2026-05-09. Quarterly review for currency.