Pre-contract review

How to review provisional sums before a residential building contract

A provisional sum is an allowance, not a magical force field around the budget. The useful review is whether the quantity, scope and rate assumptions are reasonable before the contract position is locked.

Start with the scope behind the allowance

Identify exactly what work the provisional sum is intended to cover. A single label such as landscaping or excavation can hide several different scopes, interfaces and exclusions.

Check whether the quantity basis is realistic

Where drawings allow measurement, compare the allowance with the likely quantity. A rate can look perfectly reasonable while the assumed quantity is wildly optimistic. This is where a take-off provides useful commercial evidence.

Check the rate basis

Ask whether the allowance reflects current supplier or subcontractor pricing, whether labour and materials are both included, and whether access, waste, delivery or other project-specific factors have been considered.

Understand what happens when the allowance moves

The contract treatment matters. Review how actual cost, builder margin, administration and client adjustments will be calculated if the final amount differs from the provisional sum. The commercial risk is not only that the allowance is low, but that nobody has modelled the effect of being low.

Look for clusters of uncertainty

One provisional sum may be manageable. Ten underdeveloped allowances across the same project can produce substantial contract and margin volatility. Review the aggregate exposure rather than each allowance in isolation.

A low provisional sum can make the contract price look competitive while simply postponing the real price. The number should be commercially defensible, not cosmetically convenient.

Before contract, document

  • Scope included in each allowance
  • Quantity assumptions
  • Rate source and date
  • Known exclusions and interfaces
  • How differences will be adjusted
  • Any client decisions still required