The JCT Prime Cost Building Contract is designed for projects that require an early start on site, often for alterations or urgent repair work (such as fire damage). The exact nature and extent of the work is not known until the project is underway, so full design documents are not completed until work has commenced. Prime Cost Building Contract is suitable for projects procured via the traditional or conventional method, using a cost reimbursement or cost plus payment structure.
Features of projects using the Prime Cost Building Contract:
- The employer is responsible for the design, and supplies a specification describing the work, which may be supplemented with drawings. It is usually not possible to prepare full design information before work begins on site.
- There is a higher risk for the employer in terms of cost. The cost of the project depends on the ability of the contractor to work efficiently and carry out the works as economically as possible. Provisions are included to help keep the expenditure of the Prime Cost to a minimum.
- The contractor is paid the Prime Cost of the works, as well as a contract fee in respect of its non-site overheads and profit. The fee can be a lump sum which is adjusted if the Prime Cost is more or less than that estimated in the contract by a certain percentage. The fee can also be calculated as a ‘percentage fee’ based on the actual Prime Cost incurred. The fee can also be changed if the employer changes the nature and scope of the works outlined in the Schedules.
- Prime Cost Building Contracts are normally administered either by the architect or a contract administrator.