Provisional Sum Items In Your Building Contracts
A Provisional Sum (PS) allowance is used frequently in a residential building contract.
A lot of the time people may be confused about what this term means and how it will affect their overall budget.
Before we get into items that may require a PS, Here is the Meaning of the team “Provisional Sum Item” in the HIA NSW Residential Building Contract for New Dwellings:
“Means an item of (including labor and materials) which cannot be costed exactly at the time that the contract is entered into and for which the builder has made allowance in the contract price.”
Here are a few items that may require a Provisional Sum
- Soil removal
- Demolition costs
- Traffic control
In relation to each Provisional Sum item, if the actual price is:
(a) Less than the allowance, the difference is deducted from the contract price.
(b) More than the allowance, the total of the difference and the builder’s margin applied to that difference is added to the contract price.
Generally, the builder will try to give the Provisional Sum as close as possible to what they feel the price will be. I would say you might want to allow a 10% buffer just in case.
If you want to try and avoid having a Provisional Sum in your contract it would be a good idea to spend a little bit more money upfront on getting the following:
- Detail survey report
- Final set of architectural plans
- Structural and hydraulic engineer report
There is a lot of time and resources that go into a building tender and you should expect to pay for a professionally detailed building tender.
By having all these documentation your builder will be able to provide you with an accurate building tender with little to no Provisional Sum allowance needed.