Prime cost generally is an allowance for articles to be provided by the contractor, of which price cannot be fixed at the time of tender. It refers only to the supply of materials and not to the carrying out of works. A specific amount will be earmarked in the BOQ for execution of such items. Examples are fixtures and finishing works like ceramic tiles, sanitary fittings, water supply fittings etc. that can be decided only at the time of execution. Contractor is not entitled for any profit on prime cost items, but sometimes the cost of carriage will be provided if specified in contract. The FIDIC Conditions of Contract do not mention about prime cost.
Definition of Prime cost by ICE (Institution of Civil Engineers, Great Britain)
"Prime Cost (PC) Item" means an item in the Contract which contains (either wholly or in part) a sum referred to as Prime Cost (PC) which will be used for the execution of work or the supply of goods materials or services for the Works.
How to claim Prime Cost Sum?
Contractor floats enquiries and get quotations; finalized quotation is forwarded to client for approval, along with specifications of proposed materials. After getting approval, contractor proceeds with procurement and installation. The price paid to the contractor will be the amount mentioned in the purchase invoice.