What are 'Provisional Sum Allowances'?
On any Tender or Contract for a new home there is probably a section for ‘Provisional Sum Allowances’. It might be left blank… but there also may be items listed. What does it mean?
In most cases, builders should be able to tell you what all the items will cost ahead of time. In some instances however, the builder might not know how much of a particular material or service they will need. It is important that they still list this in the Contract without over or undercharging you. It is in these instances that they may list the item as a “Provisional Sum Allowance”.
Provisional Sum Allowances
Dirt removal, demolition costs, piering, traffic control and quantities of items. These are all good examples of provisional sum allowances. Take traffic control, for example. You live on a busy main road. Your builder knows that you will need traffic control on your site for the delivery of materials. The builder even knows how much it will cost per day for the traffic control. The problem is that the builder doesn’t yet know how many days he will need the traffic control because he hasn’t booked the deliveries in yet.
In this instance, the builder uses his best judgement to suggest the quantity needed. Let’s assume that you will need traffic control on 10 different days and that it will cost $500 per day. Your builder will then put a provisional allowance of $5,000 in your contract. This is so that you can budget for those costs. If the total amount of traffic control required is only 7 times, you will only be charged for the 7 times. If 15 days of traffic control are required, then the builder will charge you for the 15 days.
What do I do if there is a Provisional Sum in my Contract?
If there is a provisional sum allowance in your Contract it is nothing to worry about. It is always advisable to talk through these costs with your builder and if you feel it is necessary, ask for the allowance to be increased to help with your budgeting.
These are a handy tool that builders can use to help you get a good idea of the cost of your project even if the exact cost isn’t available at the time of Contract creation.