Proposals · Glossary
What is a provisional sum in a building quote?
A provisional sum is an allowance in a building quote or contract for work the builder cannot price exactly when the contract is signed, such as excavation before the ground is tested. It covers labour and materials, and the contract price is adjusted up or down once the actual cost of that work is known.
Provisional sums let a builder sign a contract before every unknown is resolved. They are also one of the most common sources of price disputes on Australian home building jobs, because the final number can move a long way from the allowance.
Indunil Asanka · Co-founder
4 min read · Published
| Allowance | Covers | Adjusted when | Typical example |
|---|---|---|---|
| Provisional sum | Work, labour and materials, that cannot be priced yet | The work is done and its actual cost is known | Rock excavation, footings, air conditioning install |
| Prime cost item | Supply of an item the client has not chosen | The client selects the item | Tapware, oven, vanity, tiles |
| Contingency | Unknown risks across the job | Rarely itemised to the client; held by the builder or owner | Unexpected site conditions |
How a provisional sum works
The quote lists the provisional sum as an amount against a described piece of work, for example $8,500 for excavation and footings, subject to the soil report. That amount is included in the contract price. When the work is done, the builder works out its actual cost. If it costs more, the difference, usually with the builder's margin on that difference, is added to the price; if it costs less, the difference is credited. Consumer Affairs Victoria describes a provisional sum as a reasonable estimate of the cost of work that cannot be given a definite price when the contract is signed, and says the contract must list each item with a breakdown of the estimate.
The rules builders must follow
State laws set the conditions. In Victoria, the contract must include a detailed list of prime cost and provisional sum items with a breakdown showing estimated quantities and unit costs, and the builder must give the client copies of invoices or receipts showing the actual cost as soon as possible. The Housing Industry Association advises NSW builders that an allowance should be a reasonable estimate based on what the builder knows at signing, and that the margin on the allowance itself is already inside the contract price, so it should not be charged again on the full actual cost. Other states have their own versions, so check yours.
When to use one
Use a provisional sum only for work that genuinely cannot be priced, such as anything below ground before testing, work that depends on a design not yet finished, or services that depend on a supplier quote still to come. Each one should be as realistic as possible; an allowance set low to make the quote look cheaper simply moves the argument to the end of the job. Where you can get the information before signing, getting it and giving a fixed price is better for both sides.
Common mistakes
Low allowances are the most common problem, and they are the reason consumer regulators warn homeowners about them. Others include using a provisional sum for work that could have been priced, describing the work so vaguely that its scope cannot be checked, charging margin on the whole actual cost instead of the difference, and failing to give the client evidence of the actual cost before billing the adjustment.
Where it shows up in the product
A quote in the proposals module has one pricing table, so a provisional sum is written as its own line item with a clear name and the allowance as its price, and the terms explain how it will be adjusted. Items can carry a group label, so allowances can sit together under one heading. Price hints in the brief are authoritative, so an allowance you give stays at exactly that amount. Adjusting it later means editing the item or issuing a variation; there is no automatic reconciliation.
Questions people ask
Who pays if a provisional sum runs over?
Usually the client, because the contract price is adjusted to the actual cost, often with the builder's margin on the increase. That is why the allowance must be a reasonable estimate. If a builder set it unreasonably low, state consumer protection rules may limit what can be passed on, so seek advice before paying a large overrun.
Is a provisional sum the same as an estimate?
It is an estimate for one part of a contract, but it sits inside a contract that otherwise has a fixed price. A plain estimate is a non binding guess at a whole job. A provisional sum is a defined, adjustable allowance within a binding contract, with rules about how the adjustment is calculated.
Can a provisional sum be removed from a contract?
Yes, if both parties agree, usually by a written variation. If the client arranges the work separately, the allowance is credited back. Under the Housing Industry Association contract, the builder does not have to credit back the margin already built into the price for that item, so read your own contract's wording.
How should a provisional sum be described in a quote?
Name the work, state the allowance, give the basis of the estimate, such as quantities and unit rates, and say what information will fix the final cost, such as a soil report. A description specific enough that both sides can tell what is included prevents most later disputes.
Are provisional sums used outside home building?
Yes. Commercial construction contracts use them, and so do some service quotes where part of the scope depends on something unknown, such as third party fees or licence costs. The principle is the same: a clearly labelled allowance, adjusted to actual cost, inside an otherwise fixed price.
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