Provisional sums are one of the most common sources of confusion, and budget blowouts, in residential building contracts. Here's what they are, how they work in Queensland, and how to stop them catching you out.
What is a provisional sum?
A provisional sum is an allowance in your building contract for work that can’t be priced with certainty when you sign. It often covers things like excavation, rock removal, or other site works that are hard to estimate until the exact site conditions are known.
A provisional sum (PS) is different from a prime cost (PC) item. A PS covers work that can't be priced yet. A PC item covers a product you haven't picked yet, like tapware or an oven.
The provisional sum is an estimate based on what's known when you sign. It's included in the contract price and is adjusted once the work is done and the real cost is known. In Queensland, the builder must estimate provisional sums with reasonable care and skill (QBCC Act, Schedule 1B).
Why is it important to understand provisional sums?
Provisional sums can have a big impact on your final cost. If one is underestimated or poorly described, you can end up needing extra money, or facing delays while you find it.
Review each provisional sum in your contract and check it's enough for the work.
Remember it's an estimate, not a fixed price. The final cost may be higher or lower.
Make sure you understand what can trigger an adjustment, such as unexpected site conditions or changes to the scope of work.
How do provisional sums work?
Provisional sums are usually listed in the contract as their own line item, with a set dollar figure allocated for the work. After the work is finished, the real costs are calculated and compared against the amount that was originally allowed in the provisional sum.
If the actual cost is higher than the provisional sum, you pay the difference, plus the builder's margin on the extra, usually 10 to 20 percent. In Queensland, the contract must state that margin. If the actual cost is lower, you should get a credit for the difference. The exact adjustment terms vary between contracts, so check yours.
Example: your contract has a $10,000 PS for rock excavation and the real cost is $16,000. You pay the $6,000 difference plus the builder's margin. At 20 percent, that's $7,200 extra.
When reviewing a provisional sum, ask yourself:
Before you sign, and during the build:
• Ask how each provisional sum was worked out.
• Ask for the quotes behind any large provisional sum.
• Check the margin rate the builder will charge on overruns.
• Get every PS adjustment in writing as it happens, not in a lump at the end.
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