Understanding provisional sum and prime cost items in building contracts

Provisional sum and prime cost items are allowances made for works, materials or labour that can't be adequately quantified when a building contract is entered into. They allow a construction project to progress while the unknown amount is being determined. As these items can result in significant increases in the contract price, it's important that all parties to a building contract understand how these clauses operate before the contract is signed.

What is a provisional sum?

In most fixed price building contracts, a situation may arise where particular building materials and labour costs cannot be properly calculated at the time of finalising the contract. The provisional sum items enable the parties to estimate the cost of those works, rather than waiting until the amounts can be determined. Once the relevant work is done, the difference between the actual costs of the work and the allowance given in the provisional sum will be deducted or applied to the