Potential problems can arise in relation to provisional sums
clauses in commonly used Standards Australia construction
contracts such as AS4000, AS4300 and AS4902. Principals must be
careful to amend contracts to reduce their risks.
Provisional sums for certain items of work or equipment in a
construction contract are estimates only, and do not represent
a maximum limit for that item of equipment or work. This is
because it is not possible to accurately predict the cost of
those items or work at the time of entering into the contract,
or it is uncertain as to whether items of work will be
The most commonly used Standards Australia construction
contracts (e.g. AS4000, AS4300 and AS4902) each contain clauses
that deal with provisional sums in a similar fashion (see
clause 3 of AS4000, clause 11 of AS4300 and clause 3 of
Usually, a provisional sum included in a standard contract
is not payable until a direction is given to the contractor to
carry out that work or provide the item to which the
provisional sum relates. Where the contractor carries out that
work or provides that item, the price is determined by the
superintendent. Any difference between the provisional sum
stated in the contract and the amount determined by the
superintendent is added to, or deducted from, the contract
This regime appears fair enough. However, a potential
problem arises if the work to which the provisional sum item
relates has been carried out by a subcontractor engaged by the
contractor. In these circumstances, the principal does not have
the opportunity to independently value the work. The relevant
provisions of the standard contracts require the principal to
simply pay to the contractor the amount payable by the
contractor to the subcontractor for the work or item, plus an
amount for profit and attendance, calculated by an agreed
This is obviously an unsatisfactory outcome for the
principal. It leaves the principal exposed to significantly
increased costs for the provisional sums because (in the most
extreme cases) it creates an opportunity for contractors and
subcontractors to collude with each other in respect of the
The good news is that there are a few ways a principal can
limit or reduce its risks when dealing with provisional sums.
For example, clauses dealing with provisional sums may be
amended so that work done by subcontractors can also be valued
by the superintendent. The contract may also expressly state
that the estimated provisional sums are a cap for that item of
work and the principal must, in any event, diligently
administer the contract so that quotes from subcontractors are
reviewed and approved prior to commencement of work which
relates to provisional sums.
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