Contracts – Provisional Sums
All new house building contracts will have a section for Provisional Sums.
These are used for work that MAY be required, but the builder can’t provide an accurate estimate at the time of signing of the Contract.
The main area for provisional sums is related to foundations where the limited information obtained during the Site Investigation may not truly represent the conditions found over the whole foundation. For instance:
- A rock item may be included even if the site is clay. This caters for any large boulders that may need to be removed.
- An amount may be included for concrete piers if the amount of fill on site is hard to determine.
So the total contract price reflects the cost of building the house the builder will put in his best estimate of the cost of carrying out the work. The provisional sum will reflect the direct cost of the item to the builder only. (Overheads are included elsewhere in the contract price)
For example with a typical provisional sum item for removal of rock…… The builder will often include a figure of say $2,000 for excavation, and removal, of rock. If there is no rock the contract will be reduced by $2,000. Alternatively if the cost of excavator, labour and transport was $3,000 the final price will be increased by $1200. ($1,000 plus overhead percentage, typically 20%)
The builder is only allowed to add any overhead for profit and administration, to provisional sum expenditure items where they are above the original estimate.
Did you have any issues with Provisional Sums on your build?
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