What Is a Provisional Sum?
A provisional sum is an allowance included in a construction contract for an item of work that can’t yet be fully priced because it isn’t completely designed, documented or selected at the time the contract is signed. Once that work is properly defined and carried out, the provisional sum is reconciled and the contract price is adjusted up or down to the actual cost.
Key takeaways
- A provisional sum is a placeholder allowance in an otherwise fixed-price contract, used where a scope item genuinely can’t be priced accurately yet.
- It covers both supply and installation of undefined work, which is what distinguishes it from a prime cost item.
- The allowance is reconciled to actual cost once the work is defined, and most contracts state whether the builder’s margin applies to that adjustment.
- A provisional sum is not the same as a contingency — it’s a named, specific allowance, not a general risk buffer.
- Clear descriptions and an agreed reconciliation basis for every provisional sum are what keep the final account free of disputes.
What is a provisional sum?
A provisional sum (PS) is a dollar allowance built into a fixed-price building contract for a specific item of work that can’t be accurately priced when the contract is signed, because the design, specification or site conditions for that item aren’t yet fully known. It lets a project start on a firm overall price without waiting for every last detail to be resolved.
This comes up constantly in residential and commercial building alike — a landscaping package that hasn’t been designed yet, a kitchen the client hasn’t finalised, or site works that depend on conditions no one can confirm until excavation actually begins. Rather than delay the whole contract, the parties agree an allowance and true it up later.
Provisional sums are a standard feature of the major Australian domestic and commercial building contract forms, and most state home building regulation requires them to be itemised and disclosed clearly rather than folded invisibly into a single lump-sum price, precisely because they represent the part of the price that is still an estimate rather than a firm figure.
In plain terms
A provisional sum is a placeholder figure — “we don’t know exactly what this will cost yet, so here’s our best allowance, and we’ll true it up once it’s decided.”
What’s commonly covered by a provisional sum
Provisional sums typically turn up wherever a scope item is real and necessary to the job, but genuinely can’t be measured or priced with confidence at the time the contract is signed.
- Site conditions that can’t be confirmed until work starts, such as rock or contaminated soil encountered during excavation
- Landscaping, fencing or paving where the design is finalised after the building contract is signed
- Authority connection fees or headworks charges not yet quoted by the water, power or council authority
- Any item shown on the drawings only in general terms, pending a later, more detailed design
- Demolition or remediation work where the extent isn’t fully known until existing structures or services are exposed
How a provisional sum is structured in the contract
In the contract, each provisional sum is listed as its own line item, with a description of the work it covers, the dollar allowance, and the basis on which it will be reconciled — for example, actual cost plus a stated margin, or actual cost only.
It’s worth distinguishing a provisional sum item within an otherwise fixed-price contract — the common arrangement today — from an entire contract priced on a cost-plus or provisional basis, which is far less common on residential work and, in several states, subject to tighter disclosure rules because so much of the risk sits with the client rather than the builder.
A well-drafted provisional sum also states whether GST is included and whether the builder’s margin applies to the reconciled figure, since both materially change what the client actually pays once the item is defined.
How a provisional sum is reconciled
When the provisional work is finally designed, specified and carried out, the builder reconciles the allowance against the actual, documented cost of supplying and installing that item, and the contract price is adjusted by the difference — up if the real cost is higher, down if it’s lower.
In practice, that means the builder collects actual invoices or subcontractor quotes for the now-defined work, applies whatever margin the contract specifies, and issues the client a clear reconciliation showing the original allowance, the actual cost and the adjustment, before proceeding with the work.
| Item | Allowance | Actual cost | Adjustment |
|---|---|---|---|
| Rock excavation allowance | $8,000 | $12,500 | +$4,500 |
| Landscaping allowance | $15,000 | $11,200 | -$3,800 |
| Floor coverings allowance | $6,000 | $6,000 | $0 |
How provisional sums affect the final contract price
Because provisional sums are, by definition, allowances rather than firm prices, the contract sum stated at signing is not the final price the client will pay — the final price is only settled once every provisional sum and prime cost item has been reconciled.
Clients should expect the final account, usually confirmed around practical completion, to differ from the original contract figure for this reason alone, separate from any variations to the actual scope of work. Keeping a running reconciliation of every provisional sum as the job progresses avoids an unpleasant surprise at the end.
Who manages provisional sum reconciliations
The builder typically administers provisional sums day to day — obtaining quotes, proposing suppliers or subcontractors, and preparing the reconciliation once the work is defined, while the client approves selections or design decisions within the item.
On larger commercial projects, a quantity surveyor is often engaged to independently value the reconciliation, adding a layer of scrutiny that residential jobs usually don’t have. At tender stage, a well-prepared Bill of Quantities flags every provisional sum separately, so bidders and clients alike can see exactly which parts of the price are firm and which remain allowances.
Provisional sum vs prime cost item vs contingency
These three terms all describe uncertainty in a contract price, but they aren’t interchangeable:
- Provisional sum vs prime cost item — a prime cost item is an allowance for supplying a specific, identifiable product not yet chosen, such as tapware or tiles; a provisional sum more often covers both the supply and installation of work that isn’t fully designed at all.
- Provisional sum vs contingency — a contingency is a general risk buffer, usually a percentage held across the whole job for unknown unknowns; a provisional sum is a specific, named allowance tied to one identified item of work.
- Provisional sum vs variation — a variation changes the contracted scope after signing; reconciling a provisional sum isn’t strictly a variation, since the item was always part of the scope, only unpriced — though many contracts process the paperwork the same way.
Common mistakes with provisional sums
Most provisional sum disputes come down to a handful of preventable gaps rather than genuine disagreement about the work itself.
- A vague description with no clear statement of what is and isn’t included, which turns the reconciliation into an argument about intent
- No agreed timeframe for the client to make selections or decisions, so delays get claimed as costly knock-on effects elsewhere in the program
- Assuming margin does or doesn’t apply to the adjustment, when the contract actually says the opposite
- Treating a provisional sum as a blank cheque rather than tracking it against real quotes as the job proceeds
- Failing to get the client’s written approval of the actual cost before committing to a supplier or subcontractor
How My Trade Hub helps with provisional sums
My Trade Hub’s estimation engine flags provisional sum items separately within the Bill of Quantities it generates from your plans, so everyone looking at a quote or tender can see, line by line, exactly which parts of the price are measured and firm and which are allowances still to be confirmed.
Because the BOQ is generated straight from the drawings rather than measured by hand, updating a provisional sum the moment a rock report, quote or design decision comes in takes minutes, not a re-work of the whole document — keeping every reconciliation clean, documented and defensible.
Frequently asked questions
What is the difference between a provisional sum and a prime cost item?
A prime cost (PC) item is an allowance for supplying a specific item, like tiles or a tap, where the product itself is not yet chosen. A provisional sum usually covers both the supply and the labour to install work that is not yet fully defined at all.
Does a provisional sum include the builder’s margin?
It depends on the contract. Many contracts state that the builder’s margin applies on top of the actual cost when a provisional sum is adjusted, so always check the specific wording rather than assuming either way.
What happens if a provisional sum is not fully used?
If the actual cost of the defined work comes in under the allowance, the contract price is usually reduced by the difference, in the same way it would be increased if the actual cost were higher. The exact mechanism depends on the reconciliation clause in your contract.
Can a builder charge more than the provisional sum allowance?
Yes, if the actual, properly documented cost of the work genuinely exceeds the allowance. The difference is added to the contract price as part of the reconciliation, which is why keeping clear records and approvals for provisional sum work matters for both parties.
Are provisional sums included in the total contract price?
Yes — the allowance is included in the contract sum stated at signing, but that figure is only an estimate for that item. The true final price is only known once every provisional sum has been reconciled to actual cost.
Is a provisional sum the same as a contingency?
No. A contingency is a general risk buffer, usually a percentage of the job held for unforeseen issues generally. A provisional sum is a specific, named allowance for one identified item of work that isn’t yet fully designed or priced.
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