Does Builder or Client pay PC sums to suppliers?

SomeDude · 04-07-2021 11:00am #1

Hi All, just wondering if someone could help with this. We have a signed contract for a self build house with a builder. He has asked us to pay some of the suppliers and he will then credit us that amount in the final bill. Is this common? For example, we chose the bathroom supplier and tile supplier during the build.

Thanks

Wildly Boaring · 04-07-2021 11:03am

Ok I'm not a tax expert.

But if you buy you pay VAT at 23%
If he buys he doesn't pay VAT and you pay VAT at 13.5% on his bill.

Sleeper12 · 04-07-2021 11:21am

SomeDude wrote:

Hi All, just wondering if someone could help with this. We have a signed contract for a self build house with a builder. He has asked us to pay some of the suppliers and he will then credit us that amount in the final bill. Is this common? For example, we chose the bathroom supplier and tile supplier during the build.

Your contract should state how much you pay in installments & at what stage you should pay each installment. The whole idea is that you will owe the builder enough at the end of the job to make it worthwhile for him to finish the job or redo some work that isn't up to standard.

You'd be mad to pay a penny more than the contract says at each stage. Have a good read through the contract. Your answer is there

SomeDude · 04-07-2021 12:09pm

Sleeper12 wrote: »

Your contract should state how much you pay in installments & at what stage you should pay each installment. The whole idea is that you will owe the builder enough at the end of the job to make it worthwhile for him to finish the job or redo some work that isn't up to standard.

You'd be mad to pay a penny more than the contract says at each stage. Have a good read through the contract. Your answer is there

Thanks for that. Who normally pays the PC sum directly to the shop at the time of purchase? I know I’ll pay for it in the end in overall contract with the builder.

Sleeper12 · 04-07-2021 12:24pm

SomeDude wrote:

Thanks for that. Who normally pays the PC sum directly to the shop at the time of purchase? I know Iâ€™ll pay for it in the end in overall contract with the builder.

I don't know. I got a job costing over 100k a few years ago and the builder paid for all materials. All I paid was the regular installment agreed in the contract

landcrzr · 04-07-2021 1:31pm

Depends on what your contract says.
If you're talking pc sums, I'm guessing you have an architect, pm or engineer onboard?
Under traditional Riai contracts and using the agreed rules for measurement, arm;
A prime cost sum generally means the cost of a nominated sub contractor or supplier.
You pick the nominated subbie or supplier and you agree their spec and price. You also certify payments to them but your contractor pays them and you pay the contractor a sum for prompt payment, used to be a % of the nominated subbies price.
An important aspect is that the nominated subbie is still the main contractors subbie and not yours. The process gives the client the choice of subbie and if in place an option for a collateral warranty.

Gumbo · 04-07-2021 1:41pm

SomeDude wrote: »

Thanks for that. Who normally pays the PC sum directly to the shop at the time of purchase? I know I’ll pay for it in the end in overall contract with the builder.

Should be the contractor. Your contract is with the contractor, not the shop.

PMBC · 04-07-2021 1:51pm

The simplest explanation is understanding the term -PC means Prime Cost, frequently referred to in the jargon as PC Sums. The idea is that at the time of preparation of the documents the exact make or model of the item is not specified. Generally in contracts, conditions require the builder to provide three quotations for the item/s in question and the client or the PM chooses. If the cost before vat of the item is less than the PC Sum, the client gets a reduction on the final account for that item and vice versa. I always provided a reasonable factor of safety for such amounts but not too much. However a lot of small builders thought they were entitled to the full PC sum if the item they provided was cheaper. For self build, the client generally picks the item. Typically it was used for bathroom fittings/sanitary ware and even for door furniture. There are nuances, of course for example if the item requires a completely different/unusual method of fixing/installing which can make things interesting.

landcrzr · 04-07-2021 2:04pm

PMBC wrote: »

The simplest explanation is understanding the term -PC means Prime Cost, frequently referred to in the jargon as PC Sums. The idea is that at the time of preparation of the documents the exact make or model of the item is not specified. Generally in contracts, conditions require the builder to provide three quotations for the item/s in question and the client or the PM chooses. If the cost before vat of the item is less than the PC Sum, the client gets a reduction on the final account for that item and vice versa. I always provided a reasonable factor of safety for such amounts but not too much. However a lot of small builders thought they were entitled to the full PC sum if the item they provided was cheaper. For self build, the client generally picks the item. Typically it was used for bathroom fittings/sanitary ware and even for door furniture. There are nuances, of course for example if the item requires a completely different/unusual method of fixing/installing which can make things interesting.

Just for clarity, I think you've described a provisional sum there and not a pc sum. The two do get confused and miss labelled by times though.
Op, you do need to check what your BoQ actually describes the item as and confirm your form of contract to establish exactly what this sum is.
As the quote above says though, if it is a provisional sum, then it is your discretion to spend it or not. The contractor is not entitled to the balance. If it is a provisional sum, under Riai, you provide spec, drawings etc but your main contractor will pick their own supplier.

PMBC · 04-07-2021 9:29pm

Nope. PC Sum
Provisional Sum a different baby - to be expended in whole or in part at the engineer's/architect's discretion

ECO_Mental · 05-07-2021 2:07pm

I am in the middle of building now the way its working for me the Builder has paid for everything tiles, flooring, bathroom ware the kitchen etc

For example I went around picked out tiles I liked in a shop got a quote off them, sent it to my builder and he then went off and bought the items for me. It has the advantage that the tiles in the shop were 23% VAT but he should be charging me 13.5% as it supply and fit. So I get to save a bit.

One point of note though he does charge 5% profit on these amounts for attendance etc. taking away the some of the saving on the VAT. Also this all has the advantage of going on to the mortgage.

SomeDude · 05-07-2021 6:44pm

We’ve an engineer, an architect and a builder. The PC sums are in the contract as inclusive of VAT. Would that be typical?

ECO_Mental · 05-07-2021 7:47pm

SomeDude wrote: »

We’ve an engineer, an architect and a builder. The PC sums are in the contract as inclusive of VAT. Would that be typical?

Yes all the PC Sums in my BOQ have 13.5% VAT applied.

SomeDude · 06-07-2021 9:55am

Our contract doesn’t mention what VAT rate the PC sums are inclusive of. And of the list of PC sums, only one of them makes mention of VAT at all (it says inclusive of VAT). We questioned this with the builder and architect - both said all PC sums in the contract are inclusive of VAT. What VAT rate should we be using then when picking out sanitary ware, flooring etc in shops?

BryanF · 06-07-2021 7:39pm

Assuming you’re picking but builder is buying: 13.5%

BalboBiggins · 15-07-2021 10:42am

accidental post

Does Builder or Client pay PC sums to suppliers?

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