Provisional sums, and why two quotes are not comparable without them
The line in a building contract that makes a cheap quote look cheap.
The short answer
Two builders quote your fitout. One comes back at $340,000, the other at $385,000. The difference is not $45,000. The difference is that you don’t yet know what either number includes.
Key points
- A provisional sum is an allowance for work that cannot be priced yet.
- A prime cost item is an allowance for a product not yet selected. Different things.
- Both are adjusted against actual cost, up or down, usually with margin applied.
- A quote with thin provisional sums looks cheaper and isn’t.
- Ask what each allowance assumes, not just what it totals.
Two builders quote your fitout. One comes back at $340,000, the other at $385,000. The difference is not $45,000. The difference is that you don’t yet know what either number includes.
What a provisional sum is
A provisional sum is an allowance in the contract for work that cannot be priced accurately at signing, because the scope is not yet known.
Typical examples on a clinical fitout: services that can’t be seen until a ceiling comes down, an allowance for making good the landlord's base building, trenching where the slab condition is unknown, or an electrical upgrade whose extent depends on the supply authority.
The allowance is a placeholder. When the work is actually done, the contract sum is adjusted against the real cost, up or down. A builder's margin usually applies to the adjustment, and that should be stated rather than assumed.
How it differs from a prime cost item
Constantly confused, genuinely different.
A prime cost item is an allowance for a product that has not been selected: tapware, floor coverings, door hardware, a light fitting. The work of installing it’s priced; the item itself is a placeholder until you choose one.
A provisional sum is an allowance for work whose extent is unknown.
Rule of thumb: PC items are things you will go shopping for. Provisional sums are things nobody can see yet.
Why this decides which quote is cheaper
Here is the mechanism, and once you see it you cannot unsee it.
Builder A carries a $25,000 provisional sum for services rectification. Builder B carries $8,000 for the same unknown. Builder B's total is $17,000 lower and looks more competitive.
Neither of them knows what is above that ceiling. The work will cost what it costs. If it comes in at $26,000, Builder A's contract barely moves and Builder B's client receives a variation for $18,000 plus margin, at a point in the program where saying no isn’t an option.
The lower quote was not cheaper. It was less honest about uncertainty, or less experienced at estimating it, and you cannot tell which from the number alone.
What to actually ask
- List every provisional sum and PC item separately. A total that buries them is not comparable to anything.
- What does each allowance assume? Not the figure, the assumption behind it. "$25,000 assuming existing services are reusable and the ceiling void is accessible" tells you something. "$25,000, services" doesn’t.
- What margin applies to adjustments, and does it apply to reductions as well as increases?
- How and when is each one resolved? Some can be closed out early with an investigation before the contract is signed.
- What is genuinely excluded, as opposed to carried as an allowance? An exclusion is not a provisional sum; it is a cost that is entirely yours.
Reducing them is usually worth paying for
Most provisional sums exist because nobody has looked. An investigation before contract, opening a ceiling access panel or getting a services report, converts a guess into a price.
That costs a small amount and removes a large uncertainty, and on a fitout where you’re carrying rent it’s almost always the better trade. It’s also part of what a feasibility assessment is for.
Related: how to choose a fitout company, which covers the rest of what makes two quotes comparable, and the published cost ranges so you have an independent reference before either number arrives.
Sources and further reading
Contract mechanics vary between standard forms and bespoke contracts. Have any building contract reviewed by a construction lawyer before signing.
The National Construction Code: building classification, fire separation, egress, sanitary provisions and access.
Building activity and construction cost data, useful for sanity-checking where trade pricing is heading.
Questions
What is a provisional sum in a building contract?
An allowance for work that can’t be priced accurately at signing because its extent isn’t yet known, such as services rectification above a ceiling that has not been opened. When the work is carried out, the contract sum is adjusted against the actual cost, up or down.
What is the difference between a provisional sum and a prime cost item?
A prime cost item is an allowance for a product not yet selected, such as tapware or floor coverings, where the installation is already priced. A provisional sum is an allowance for work whose extent is unknown. PC items are things you go shopping for; provisional sums are things nobody can see yet.
Does the builder charge margin on a provisional sum adjustment?
Usually, and it should be stated in the contract not assumed. It is also worth asking whether the same margin treatment applies when an allowance comes in under, not just over.
Why do provisional sums make quotes hard to compare?
Because a builder carrying a thin allowance produces a lower headline number for identical work. The work still costs what it costs, and the difference arrives later as a variation at a point where refusing is not practical. Compare the allowances and their assumptions, not the totals.
Can provisional sums be reduced before signing?
Often, and it is usually worth paying for. Most exist because nobody has investigated. Opening an access panel or commissioning a services report converts a guess into a price, which removes risk at a stage where you can still act on the answer.
Send us the floor plan
A site assessment tells you what the tenancy can take and what it will cost to get there, ideally before you have signed for it.