Provisional sum

An allowance in a building contract for work where the scope or extent is uncertain at signing. The contract includes a budgeted amount; the actual cost is determined when the work is done and reconciled against that amount.

Definition

A provisional sum is an allowance in a building contract for work where the exact scope or extent cannot be determined at the time of signing. The contract includes a budgeted amount; once the work is performed and its actual cost known, the difference is reconciled against the budgeted amount.

Common examples: site works (where ground conditions can't be fully known until excavation), driveway construction, landscaping, retaining walls, and any work that depends on something unknown at signing.

Why it matters

Provisional sums let builders price contracts that include necessary work whose extent depends on conditions that won't be known until the build starts. The risk for owners is that provisional sums can become a major source of cost overrun, particularly for site works, where unexpected ground conditions can multiply the original allowance several times.

How it works in practice

The contract identifies which scope items are covered by provisional sums and the budgeted amount for each. When the work is performed, the builder documents the actual labour and materials cost (typically with cost receipts and timesheets) and reconciles against the allowance. The contract price adjusts based on the difference.

A provisional sum is not a fixed price. The builder is not bound to deliver the work for the budgeted amount. The reconciliation is honest: actual cost wins, in either direction.

The most consequential provisional sum on most residential builds is site works. The site works allowance covers earthworks, foundations preparation, and anything related to making the site buildable. If the geotechnical assessment turned up surprises (rock, soft ground requiring deeper foundations, contaminated soil), the actual cost can substantially exceed the allowance. Many builder-owner disputes start here.

Common misconceptions

Provisional sums are fixed-price

They aren't. The budgeted amount is an estimate, not a cap.

Provisional sums are the builder's risk

They aren't. The owner pays the actual cost, not the budgeted amount. The builder bears the risk of mispricing labour, but the cost variation flows to the owner.

You can negotiate the provisional sum amount before signing

Yes, and you should. If a builder has set a low site works allowance to make the contract look competitive, push for a more realistic number based on the actual geotechnical report and similar local builds. Adjusting expectations at signing is much easier than disputing variations during construction.