Provisional Sums in Building Contracts: A Cost Check Before You Sign

Short answer

A provisional sum is an allowance in a building contract for work that cannot be priced exactly when the contract is signed. Common examples include excavation, rock removal, asbestos removal and some site works.

It is not a fixed price. The contract price may be adjusted after the actual work is completed, using the contract's rules for evidence, credits, excess costs and any stated margin.

Before comparing two building quotes, total every provisional sum and prime cost allowance. A lower headline contract price can carry more uncertainty if a large share of the work is not fixed.

Why provisional sums appear

Some work cannot be priced properly until the builder has more information. Soil conditions, hidden rock, existing structures and access constraints can change the labour, materials and equipment required.

Australian state rules and standard contracts use different wording, but primary consumer guidance consistently treats a provisional sum as an estimate for work rather than a selected fixture.

For example:

• the Queensland Building and Construction Commission lists rock removal, asbestos removal and earthworks as common provisional-sum items;
• Consumer Affairs Victoria uses excavation as an example; and
• WA Building and Energy says site-work contracts commonly include a provisional sum where the scope and cost cannot be clearly foreseen.

Provisional sum vs prime cost item

The two allowances solve different problems.

Allowance	What is uncertain	Common example
Provisional sum	The scope or cost of work	excavation or rock removal
Prime cost item	The exact fixture or fitting selected, or its price	taps, tiles or an oven

A prime cost item generally covers the supply and delivery allowance for a product that has not been finally selected. A provisional sum generally covers particular work or services where a definite amount cannot yet be stated.

Read the definitions in the contract being offered. State legislation and the contract terms determine the actual adjustment method.

The seven checks to make

1. Total all variable allowances

List each provisional sum and prime cost item in a spreadsheet. Add them together and divide by the contract price.

QBCC warns that a contract with a high proportion of its price in allowances carries added cost risk, particularly for an owner with a tight budget. Its guide uses 30% or more as an example of a high proportion, not as a universal legal limit.

2. Ask what investigation supports each estimate

For excavation or footings, ask whether the builder has reviewed a soil test, contour survey, service information and site access.

WA Building and Energy says site investigations should be completed before entering a building contract and that a builder should estimate site-work costs only after a reasonable site inspection.

3. Check whether the allowance is realistic

A provisional sum should not be a token amount included only to make a quote look cheaper.

NSW's standard home building contract states that provisional sums are to be estimated with reasonable care and skill using the information available at the contract date. Queensland and Victorian guidance also refer to reasonable enquiries, care or allowances.

The precise obligation differs by state. If the figure appears low compared with site evidence or competing quotes, ask the builder to explain the quantity, rate and assumptions in writing.

4. Read the adjustment and margin clause

Check what happens when the actual cost is:

• lower than the allowance;
• higher than the allowance; or
• affected by a change in scope.

Ask whether a builder's margin, administration amount or other percentage is added to an excess. Do not assume every standard contract calculates the adjustment in the same way.

5. Ask what evidence you will receive

Consumer Affairs Victoria recommends obtaining invoices, receipts or other documents showing the cost of provisional-sum items. QBCC notes that some contracts require supporting documents for allowance costs.

Confirm the evidence requirement in the proposed contract before signing, including when it must be provided.

6. Keep a separate contingency

Do not treat the provisional sum as the most the work can cost. Hold a separate cash contingency that is not already allocated to the deposit, stamp duty, settlement or moving costs.

Use the Property Purchase Cost Calculator to estimate the broader acquisition budget. It does not estimate building-contract variations, site works or provisional-sum overruns.

7. Get the contract reviewed

A building contract allocates legal and financial risk. Ask a construction lawyer or other appropriately qualified adviser to review unclear allowance, variation, margin and termination clauses before signing.

This guide cannot interpret a particular contract.

Worked comparison: two $500,000-style quotes

Assume Builder A quotes $500,000 with $70,000 of provisional sums and prime cost allowances. Builder B quotes $515,000 with $25,000 of allowances.

Quote	Headline price	Variable allowances	Fixed portion before other adjustments
Builder A	$500,000	$70,000	$430,000
Builder B	$515,000	$25,000	$490,000

Builder A is $15,000 cheaper on the headline price, but $45,000 more of the price is variable.

Now assume Builder A's allowance work costs $30,000 more than estimated and the contract applies a 15% margin to that excess. The simplified increase would be:

• allowance overrun: $30,000;
• 15% margin on the overrun: $4,500; and
• simplified adjusted price: $534,500.

Builder B may still have its own adjustments and could finish above or below the original quote. The example shows why allowance exposure and contract terms matter more than the headline difference. It is not a forecast of either builder's final price.

Questions to send the builder

1. Which parts of this price are fixed?
2. Which items are provisional sums or prime cost items?
3. What reports and assumptions support each allowance?
4. Does the amount include labour, materials, delivery, plant, GST and site access?
5. What margin or fee applies if actual cost exceeds the allowance?
6. How is an underspend credited?
7. What invoices, receipts or other evidence will I receive?
8. When will the final amount be known?
9. Can any allowance be converted to a fixed price before signing?

Keep the answers with the contract documents.

State rules are not identical

Domestic building law is state and territory based. Contract-value thresholds, mandatory wording, home warranty cover, cooling-off rights, variation rules and dispute processes differ.

The sources below illustrate NSW, Victoria, Queensland and WA guidance. They do not establish the rules for every project in Australia. Check the regulator and legislation for the state where the building work will occur.

For a current WA example involving site installation and approvals, read the WA Prefab Pod Permit Warning.

Sources

• NSW Government: Home building contract for work over $20,000, including the provisional sums clause in the official template, checked 27 July 2026.
• Consumer Affairs Victoria: Changing a major domestic building contract, last updated 1 July 2025 and checked 27 July 2026.
• Queensland Building and Construction Commission: Domestic building contracts, general information for owners and contractors, checked 27 July 2026.
• WA Building and Energy: Site considerations before you buy or build, checked 27 July 2026.

General information disclaimer

This guide provides general information only. It is not legal, building, engineering, financial or contract advice. It does not interpret a contract or determine whether an allowance, price adjustment or builder claim is valid. Obtain advice for the contract, site and jurisdiction before signing or disputing an amount.

Last updated: 27 July 2026.