A contractor prices a subdivision civil package. Item 14 reads “Allowance for service authority adjustments — Provisional Sum $45,000”. They carry the $45,000 in their total, apply their usual 12% overhead and margin across the bill, and submit.
The authority’s actual invoice comes in at $71,400. The contractor claims the difference. The superintendent adjusts the provisional sum to the actual cost — and applies margin only on the increase, per the contract, at a rate specified in the special conditions that the contractor never read. The margin they thought they had on the original $45,000 was never there; provisional sums in that contract were to be carried net.
Nobody did anything wrong. The contractor simply priced one mechanism as though it were a different one.
Four mechanisms that look alike
Open any civil pricing schedule and you will find four different things presented in the same table, in the same font, with the same columns.
- Measured items — a described item, a unit, a quantity and your rate. Paid on the quantity actually built.
- Provisional quantities — the same, but the quantity is flagged as uncertain and may go to zero.
- Provisional sums — a cash allowance set by the principal for work whose scope or cost cannot be defined.
- Prime cost sums — a cash allowance for a supply item or a nominated supplier’s material.
They differ in who sets the number, what happens to the difference, whether your margin applies, whether you can claim time, and whether the work is yours to do at all. Those five questions are the whole of this guide. Short definitions of these and every other term in a civil pricing schedule are in our civil construction tendering glossary.
What a bill of quantities is
A bill of quantities lists every element of work required for the construction, described clearly and measured in standardised units — typically prepared by a quantity surveyor.[1] Its function in tendering is to give every bidder the same measured scope, so that tenders can be compared like for like rather than on differing interpretations of the drawings.[1]
Two consequences follow for a tenderer, and they pull in opposite directions.
The benefit: someone else did the take-off. The Australian Institute of Quantity Surveyors estimates that providing a bill of quantities to builders and trades can reduce the hours required for measurement by 60–80%.[1] On a tight tender programme with three bids due the same week, that is the difference between bidding and not bidding.
The risk: you are pricing someone else’s measurement. Whether an error in the quantities is your problem depends entirely on the contract. Under a remeasured contract it does not matter — you are paid for what is built. Under a lump sum contract where the bill is provided “for information only”, an under-measured item is your loss. That distinction is the single most important thing to establish before pricing a bill, and it is covered in our guide to schedule of rates vs lump sum vs cost-plus.
On most Australian council and agency civil work the bill is remeasured, which is why the model dominates the sector. But “the bill is remeasured” is a statement about the contract, not about the document, and it should be confirmed rather than assumed.
Method of measurement — the part that decides your rate
The quantities in a bill are prepared in accordance with a stated method of measurement, so that everyone with the bill knows they are working to the same standard measurements.[2] In Australian practice building work commonly follows the Australian and New Zealand Standard Method of Measurement of Building Works; civil work more often follows a method set out in the specification or adopted by the road authority.
The method of measurement matters more than the quantity, because it defines what your rate has to cover. Two contractors can price the same item, honestly, and be 25% apart because they read the measurement rules differently.
| Item | The question the method answers | Why it changes your rate |
|---|---|---|
| Excavation | Measured in-situ or loose? Is bulking allowed for? | A 20–30% difference in the same physical work |
| Trench excavation | Measured to nominal trench width or actual? Depth banded, and from what datum? | Battered trenches in deep work can double the volume you actually move against the volume you are paid for |
| Pipe laying | Measured over or through pits and structures? | On a job with 40 pits, several hundred metres of difference |
| Asphalt | Paid by area at nominal depth, or by tonne placed? | Area pricing puts thickness tolerance risk on you; tonnage pricing does not |
| Imported fill | Measured in-situ compacted, or by delivered tonne? | Compaction factor becomes your risk under one and not the other |
| Concrete | Is formwork separately measured, or included in the concrete rate? | Formwork can exceed the concrete cost on small kerb returns and structures |
| Disposal | Measured at the excavation or at the tip? Classified or unclassified? | Disposal classification drives cost more than haul distance on contaminated sites |
Where the method is not stated, or is stated only by reference to a document not provided, ask during the tender period. It is a legitimate clarification, the answer applies to every tenderer, and the response goes on the record — which matters if the measurement basis is later disputed.
Reading and pricing a BOQ
A disciplined pass through a bill takes an hour and prevents most of the pricing errors civil SMEs make.
- Classify every line first. Measured, provisional quantity, provisional sum, PC sum, lump sum, or dayworks. Mark them. Do not price anything until every line is classified — this is the step that would have prevented the opening scenario.
- Check the preambles. The general items and preamble sections carry the measurement rules, what is deemed included in rates, and how items are to be priced. They are boring and they govern everything below them.
- Find where fixed costs are meant to go. Is there an establishment item? A traffic management item? A site facilities item? If not, those costs have to be spread across measured rates — and that spread is only right at the estimated quantities.
- Spot-check the quantities on high-value items. Not the whole bill. The three or four items carrying most of the value. A material error there is worth knowing about even on a remeasured contract, because it changes your resourcing and programme.
- Identify items with big set-up components and small quantities. These are where rate risk concentrates — a 40m³ item that needs the same plant mobilisation as a 900m³ one.
- Note anything that looks like it belongs to someone else. Service authority works, testing by others, supply-only items. These are usually provisional or PC sums, and treating them as your work to price is an expensive mistake.
- Check for quantity-variation provisions. Some contracts allow rates to be revisited where quantities move beyond a stated percentage. Knowing the threshold changes how you price marginal items.
The build-up behind each rate — labour, plant, materials, production assumption, fixed-cost allocation, overhead and margin — should be recorded in a form you can reproduce months later. Our guide to preparing civil works cost estimates covers that discipline, and it is what makes a rate-adjustment argument possible when quantities move.
Provisional sums
A provisional sum is an allowance for the full scope of work where the cost cannot be accurately determined at contract stage. It generally covers both labour and materials, and it is used for work affected by unknown site conditions, incomplete design, or unresolved engineering details.[3]
Key characteristics:
- The principal sets the number, not you. You carry it in your total as instructed.
- It is an allowance, not a price. The difference between the actual cost of the work and the allowance is added to or deducted from the contract price.[3]
- It may never be instructed at all. If the work is not required, the allowance comes out entirely.
- Margin treatment is contract-specific. Where the actual cost exceeds the allowance, a margin is commonly added to the increase[3] — but the rate, and whether margin applies to the base allowance at all, is set by the contract.
In civil work the typical provisional sums are: service authority adjustments and relocations, contaminated material handling and disposal, work by a nominated third party, specialist testing, unforeseen structural repairs, and heritage or archaeological requirements. The common thread is that the cost is controlled by someone other than you.
One point that catches contractors out: a provisional sum item still carries programme consequences. If the service authority takes nine weeks instead of three, that is a delay — and the time claim runs on the ordinary time provisions, not on the provisional sum mechanism. See our guide to extension of time and delay cost claims. Provisional sum work is very often on the critical path precisely because it depends on third parties.
Prime cost sums
A prime cost item is an allowance for a material, product or fixture that has not been selected at the time the contract is signed.[3] The distinction commonly drawn is that prime costs relate to supply — the material or product itself — while provisional sums relate to work, generally including the labour to carry it out.[3]
Most published guidance on prime cost items is written for residential building, where the examples are tiles, tapware, appliances and lighting. In civil work the mechanism appears less often and looks different — it is typically used for a supply item whose specification or supplier has not been settled: a pump, a proprietary pit or lintel, a specific streetlight or bollard type, signage, or landscape material.
The practical points for a civil contractor:
- The PC sum covers supply. The installation is usually yours and usually measured separately. Check that the bill actually contains an installation item — if it does not, the labour has to sit somewhere, and it should not be an accident.
- Handling, delivery, storage and fixing are commonly outside the PC sum. A $9,000 PC sum for a pump does not include craning it into a wet well at 6am on a Sunday.
- The adjustment is on the supply cost only, which means a PC item that comes in over allowance may increase your installation exposure without increasing your recovery.
Both mechanisms exist because the final cost is not known when the contract is signed, and both create conditions in which the final project cost can significantly exceed the contract price.[3] That is a fact about the principal’s budget, but it is also a fact about your tender total — a bid carrying $180,000 of provisional and PC sums is a bid where a large slice of the number is not yours and not within your control.
Provisional quantities — the civil workhorse
The mechanism most useful to a civil contractor is also the one least discussed, because it barely exists outside civil engineering.
A provisional quantity is an ordinary measured item, at your rate, where the quantity stated is flagged as uncertain and may reduce to zero. Rock excavation is the classic example: the bill carries 300m³ at your rate, and if you encounter 40m³ you are paid for 40 at your rate, and if you encounter 900m³ you are paid for 900.
The difference from a provisional sum is fundamental and worth being precise about:
- You set the rate on a provisional quantity. The principal sets the number on a provisional sum.
- Your margin is inside the rate, so it applies to every unit, at every quantity, without an adjustment argument.
- It is your work, priced by you, at rates you built. No third party controls the cost.
That makes provisional quantities the right answer to a great deal of civil ground risk. Where you can see an uncertainty at tender stage — rock, unsuitable material, dewatering, additional pavement depth, contaminated disposal — a provisional quantity isolates it, prices it properly, and removes the need to either absorb it or load every other rate to cover it.
The rate on a provisional quantity item deserves particular care, precisely because the quantity is uncertain. A rate that only works at 300m³ is a rate that fails at 40m³, and the fixed-cost allocation inside it is the first thing to check. Record the assumption; it is the basis of any later adjustment argument.
The comparison table
| Measured item | Provisional quantity | Provisional sum | Prime cost sum | |
|---|---|---|---|---|
| Who sets the number | Principal sets quantity, you set rate | Principal estimates quantity, you set rate | Principal sets the sum | Principal sets the sum |
| What it covers | Defined work | Defined work, uncertain extent | Work — usually labour and materials | Supply of a material or product |
| Might be zero | Rarely | Yes | Yes | Rarely |
| Your margin | Inside your rate | Inside your rate | Per the contract — often on the adjustment only | Per the contract |
| Adjusted how | Remeasurement | Remeasurement | Actual cost substituted for the allowance | Actual supply cost substituted |
| Who controls the cost | You | You | Often a third party | Supplier / specifier |
| Typical civil use | Pipe, pavement, kerb, earthworks | Rock, unsuitable material, dewatering, classified disposal | Authority works, contamination, specialist testing | Pumps, proprietary products, lighting, signage |
| Best for you when | Scope is defined | You can foresee the risk but not the extent | Cost is genuinely outside your control | Product is unspecified |
How each is adjusted, and where your margin goes
The adjustment mechanism is where money is quietly won and lost, and it is set by the contract rather than by convention. Three questions to answer from the special conditions before you price.
1. Is the provisional sum carried net or with margin? Some contracts require provisional sums to be carried exactly as stated, with margin applied only on adjustment. Others allow you to include margin in the carried amount. Pricing on the wrong assumption either loses you margin or makes your bid uncompetitive by an amount you cannot explain.
2. What margin rate applies to the adjustment, and does it cover overhead? Contracts frequently fix this — 10% is common. Where your true overhead recovery is higher, provisional sum work is dilutive, and a job with a large provisional component earns less than its headline value suggests.
3. Is the adjustment on actual cost, or on a quoted price? Actual-cost adjustment means substantiation — invoices, dockets, subcontractor accounts — and it means the recovery is delayed until the cost is proven. Build that into your cashflow expectation.
One distinction worth holding onto: provisional sums will often require adjustments to the contractor’s margin, whereas rise and fall provisions generally do not.[4] The two mechanisms are sometimes confused, and they answer different problems — a provisional sum handles unknown scope, while a rise and fall clause handles known scope at changing prices. Our guide to rise and fall and cost escalation clauses covers the second.
Dayworks and schedules of rates for extra work
Many civil bills carry a dayworks schedule — hourly rates for labour classifications and plant items, used to value work that does not fit any measured item.
Contractors treat these as filler and price them carelessly. That is a mistake, because dayworks rates become the default valuation basis for directed work with no applicable rate — which is exactly the situation in which you most want to be paid properly. A dayworks schedule priced at bare cost to keep the tender total down becomes the rate you are paid for every unscheduled instruction on the job.
Three rules:
- Price dayworks rates to be genuinely viable, including on-costs, supervision, small tools, overhead and margin.
- Check whether the dayworks total is included in the tender comparison. Often it is not, or it is weighted lightly — in which case pricing them properly costs you nothing competitively.
- Record dayworks contemporaneously and get them signed daily. An unsigned dayworks sheet produced at claim time is worth very little; a signed one is close to unarguable.
Where civil contractors lose money on these
| Mistake | What it costs |
|---|---|
| Treating a provisional sum as your work and your margin | The opening scenario. Margin that was never there |
| Not checking whether PC sums include installation | Uncosted labour on every PC item in the bill |
| Pricing a provisional quantity item at a rate that only works at the stated quantity | Under-recovery when the quantity collapses; a rate-adjustment argument you may not be able to substantiate |
| Ignoring the method of measurement | Systematic under-pricing across an entire trade |
| Pricing dayworks rates at cost | Every unscheduled instruction valued at bare cost |
| Missing the programme impact of provisional items | Third-party delay absorbed instead of claimed |
| Assuming a bill is remeasured when it is provided for information only | Quantity risk you did not know you accepted |
| Not substantiating provisional sum actual costs promptly | Delayed recovery, sometimes disallowed recovery |
Using them as a risk tool at tender stage
The most valuable use of these mechanisms is not administrative. It is as a way of handling risk you can see but cannot quantify — which is the recurring problem in civil tendering.
When you identify a genuine uncertainty during the tender period — thin geotechnical information, possible contamination, unknown service depths, a pavement of unknown composition — you have four options, and only one of them is good.
| Option | Consequence |
|---|---|
| Absorb it silently | You have bought an unquantified risk at no price. The most common choice and the worst |
| Load your rates to cover it | You lose the job to someone who did not. And if the risk does not eventuate, you were never going to win |
| Qualify the tender | Effective where qualifications are permitted, but many government tenders treat them as non-conformances. Check the conditions of tendering first |
| Ask for a provisional quantity or provisional sum during the tender period | The good option. It isolates the risk, applies to every tenderer equally, and lets you price the rest of the job competitively |
The request is a normal clarification: “The geotechnical information does not extend below RL 41 across chainages 200–450. Would the principal consider including a provisional quantity item for rock excavation, to allow tenderers to price the risk consistently?” Principals often agree, because it improves the comparability of their tenders as much as it protects you.
Where they decline, that is itself informative — it tells you the ground risk is being transferred deliberately, and it should feed into both your price and your go/no-go decision. The related contractual protection, and what happens when the ground is not what the documents indicated, is covered in our guide to latent conditions.
What to check before you price
- Every line classified — measured, provisional quantity, provisional sum, PC sum, lump sum, dayworks.
- Is the bill remeasured, or provided for information only under a lump sum?
- What method of measurement applies, and where is it stated?
- Where do establishment, traffic management and site facilities costs belong?
- Are provisional sums to be carried net or with margin?
- What margin rate applies to provisional sum adjustments?
- Do PC sums include delivery, handling and installation, or are those measured separately?
- Is there a quantity-variation threshold that allows rates to be revisited?
- Are dayworks rates included in the tender evaluation total?
- Which provisional items sit on the critical path, and who controls them?
The short version
- Classify every line in the bill before pricing any of it. The four mechanisms look identical and behave completely differently.
- The method of measurement decides what your rate must cover — it matters more than the quantity.
- Provisional sums are the principal’s allowance for work often outside your control; your margin treatment is set by the contract, not by habit.
- PC sums cover supply. Confirm where the installation cost lives.
- Provisional quantities are the civil contractor’s best tool: your rate, your margin, your work, on an uncertain extent.
- Ask for a provisional item when you find a risk you can see but cannot quantify. It is better than absorbing it and better than pricing yourself out.
References
This guide is general information for Australian civil construction businesses and is not legal or financial advice. The treatment of provisional sums, prime cost items, measurement and margin differs between contracts, and residential building contracts are subject to statutory requirements that do not apply to civil works. All examples are illustrative. Always work from the tender and contract documents.
- Matrix Estimating — The Ultimate Guide to Bill of Quantities (BOQ) for Australian Construction; Sydney Estimator — What Is a Bill of Quantities (BOQ) and Why It Matters; Altus Group — Why Australian Developers Can Count On A Bill Of Quantities; Australian Institute of Quantity Surveyors — AIQS Calls for Return of Bills of Quantities. A bill of quantities as a document prepared by quantity surveyors listing every element of work required for construction, described clearly and measured in standardised units; its role in the tendering process in providing a standardised format ensuring all bidders price the same scope of work, promoting fairness and comparability and producing tenders with less spread on a like-for-like basis; and the AIQS estimate that providing a bill of quantities to builders and trades can reduce the hours required for measurement by 60–80%. ↩ ↩ ↩
- Altus Group — Why Australian Developers Can Count On A Bill Of Quantities (quantities in a bill traditionally prepared in accordance with the Australian and New Zealand Standard Method of Measurement of Building Works, so that everyone with the bill knows they are working to the same standard measurements). ↩
- Mondaq — Understanding provisional sum and prime cost items in building contracts and Understanding provisional sums and prime cost clauses in Queensland construction contracts (Construction & Planning, Australia); Construct Law Group — Prime Cost Sums and Provisional Sums; Builtly — Provisional Sum vs Prime Cost Item Australia Explained. A provisional sum as an allowance for the full scope of work where the builder cannot accurately determine the cost at contract stage, generally including both labour and materials, used for works affected by unknown site conditions, incomplete design or unresolved engineering details; a prime cost item as an allowance for a material or fixture not yet selected when the contract is signed, usually relating to finishes and fittings; the distinction that prime costs relate specifically to material items while provisional sums relate primarily to labour requirements such as excavation works; the adjustment mechanism by which the difference between the actual costs of the work and the allowance given in the provisional sum is deducted from or added to the contract price, with a builder’s margin added to any increase where the actual cost exceeds the allowance; and the observation that both mechanisms represent items where the final cost is not known when the contract is signed, creating conditions for the final project cost to significantly exceed the contract price. ↩ ↩ ↩ ↩ ↩ ↩
- Turtons Lawyers — 5 crucial tips for a rise and fall clause (the caution against confusing rise and fall clauses with provisional sum mechanisms, and the observation that provisional sums will often require adjustments to the contractor’s margin whereas rise and fall provisions generally do not). ↩