Provisional sums explained

In the blog post, we dive into:

• What Provisional Sums are,

• How they can be used for good on your project,

• How they are drawn upon during your build, and

• Tips for getting the most value from Provisional Sums.

You think provisional sums in your building contract are just flexible line items for unknown costs. But actually, they're one of the biggest risks to your fixed-price contract.

Here's what most people do when they see provisional sums in their contract:

They trust the builder's estimate is reasonable. They assume if something costs less than the provisional sum, they'll get money back. They figure it's normal because every contract has them.

Then halfway through their build, they get hit with thousands in "additional costs" because the provisional sums weren't enough.

Let me tell you about Sarah. She was building her dream home in regional Victoria with three girls under five. Her contract had $15,000 in provisional sums for site works and landscaping. Seemed reasonable.

But here's what she didn't know: those provisional sums gave her builder complete control over when and how that money got spent. The site works came in at $12,000, but instead of getting $3,000 back on her next progress claim, it just... disappeared into "adjustments."

When I reviewed her contract after the fact, I found the clause that should have protected her. It was there in black and white: if actual costs are below the provisional sum, the builder must deduct the difference from the next progress claim.

But Sarah didn't know to track it. She didn't know to ask for quotes before the work started. She didn't know that provisional sum was actually part of her contract price, not extra money sitting in a separate bucket.

She got the house, but it cost her $8,000 more than it should have.

What you think provisional sums are vs what they actually are

Most people think provisional sums are the builder's way of being honest about uncertainty. "We don't know exactly what this will cost, so here's our best guess."

And that's partially true. But here's what they don't tell you:

A provisional sum isn't just an estimate. It's money that's already included in your contract price. You're paying for it whether it gets used or not, unless you actively manage it.

The builder controls when that work happens, who does it, and whether you see any savings if costs come in lower.

And most importantly, provisional sums only work in your favor if your contract has the right protections built in and you know how to enforce them.

What provisional sums are really for

A provisional sum should only exist when the scope genuinely cannot be defined before signing. Things like:

• Rock removal or unexpected site conditions you can't see until excavation starts

• Landscaping when you haven't finalized the design

• Fixtures you're still selecting but know you'll need

The builder proposes a reasonable budget. You approve how it gets spent during the build. If the actual cost is lower, you get money back. If it's higher, you pay the difference.

That's how it's supposed to work.

The real cost of provisional sums nobody talks about

Every provisional sum in your contract is a gap in your price certainty. And those gaps add up fast.

I've seen contracts with $40,000+ in provisional sums for things like "electrical upgrades" and "plumbing variations" that could have been scoped and priced before signing.

When you sign a contract full of provisional sums, you're not signing a fixed-price contract. You're signing a "fixed except for all these things we decided not to lock down" contract.

And the worst part? You don't realize it until you're already building and the invoices start rolling in.

How to protect your build

Before you sign, look at every provisional sum in your contract and ask: does this genuinely need to be provisional, or could we get a fixed price now?

If the scope is clear, push to remove it. Get a fixed price instead.

For the provisional sums that genuinely need to stay, make sure your contract says:

• The builder must provide quotes or invoices before drawing on the provisional sum

• You must approve the work in writing before it happens

• If costs come in lower, the builder must deduct the difference from your next progress claim

• If costs come in higher, the builder must provide evidence before charging you more

Then during your build, track every provisional sum . When the builder says they're about to use one, ask for the quote first. Compare it to the allowance. Get it in writing.

This is what I do for my clients in every contract review. We go line by line, identify which provisional sums are actually necessary, negotiate fixed prices for the rest.

Know exactly what you're signing before you build

Protect your dream build with a Building Contract Health Check:

• Spot budget blowout risks before they're locked into your contract

• Identify which provisional sums can be converted to fixed prices

• Get the right protections in place so you're not paying for the builder's uncertainty

I work with clients on HIA and Master Builders contracts across Victoria, ACT, Queensland, New South Wales, Tasmania, WA, and the Northern Territory.

Thanks for reading,

Annelyse

Construction Management | M. Construction Law