Omit the sum, add the work valued under the contract: the difference between that and the net expenditure is where final accounts surprise.
In the final account each provisional sum is omitted in full and replaced by the value of the work actually instructed against it, with overheads and profit added and, for an undefined sum, any time-related preliminaries it caused. On an illustrative contract carrying 790,000 of provisional sums, work worth 880,500 net becomes an addition of 992,160, so the final account moves by +202,160, not the +90,500 a net comparison suggests.
Worked in full in Construction Cost Control by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
A provisional sum is a placeholder for work that could not be measured at tender: a utility diversion still being designed by the statutory undertaker, landscaping waiting on a planning condition, a client's fit-out choice not yet made. The contract sum carries the figure; nobody expects the final account to. The adjustment is mechanical, and yet it is one of the most frequent sources of a surprise at the end of a job, because the money the client sees in the cost report is the net expenditure, while the money the contractor is entitled to is the expenditure valued under the contract.
| Provisional sum | Type | In contract sum | Expended, net |
|---|---|---|---|
| Landscaping | Defined | 240,000 | 268,500 |
| Utility diversions | Undefined | 400,000 | 612,000 |
| Feature lighting | Undefined | 150,000 | 0 |
| Total | 790,000 | 880,500 |
| Other input | Value |
|---|---|
| Overheads and profit on the value of work | 6.0% |
| Time-related preliminaries, per week | 18,500 |
| Weeks of delay caused by the utility diversions | 3 |
| Weeks the contractor also claims for the landscaping | 2 |
The distinction between the two types decides the preliminaries. A defined provisional sum comes with a description of the work, its quantity and its timing, so the contractor is deemed to have allowed for it in its programme and preliminaries. An undefined sum gives none of that, so the work instructed against it is valued like a variation, including any effect on time-related costs. That is the usual UK convention under NRM2 and the JCT forms; check the definitions in your own contract before relying on it.
Adjustment = − provisional sum + expended value × (1 + OH&P) + time-related preliminaries × (1 + OH&P), the last for undefined sums only
In Excel, one row per sum: =-C2+D2*(1+$B$10)+IF(B2="Undefined",E2*$B$11*(1+$B$10),0), with the sum in C, the net expenditure in D, the delay weeks in E, OH&P in B10 and the weekly rate in B11.
Landscaping, defined. Omit 240,000. Add 268,500 plus 16,110 of OH&P, 284,610. The contractor's claim for 2 weeks of preliminaries, 37,000 net or 39,220 with OH&P, is rejected: the work was as described, so its time was already in the programme. Net movement: +44,610.
Utility diversions, undefined. Omit 400,000. Add 612,000 plus 36,720 of OH&P, 648,720, and 3 weeks of time-related preliminaries, 55,500 net and 58,830 with OH&P. Addition 707,550, net movement +307,550.
Feature lighting, undefined. The client never instructed it. Omit 150,000, add nothing. Net movement −150,000.
| Item | Omit | Add | Net |
|---|---|---|---|
| Landscaping | −240,000 | 284,610 | 44,610 |
| Utility diversions | −400,000 | 707,550 | 307,550 |
| Feature lighting | −150,000 | 0 | −150,000 |
| Total | −790,000 | 992,160 | 202,160 |
The provisional sums were 3.0 per cent of the contract sum, and their adjustment adds 0.78 per cent to it. The cost report that tracked only net expenditure against the sums showed 880,500 against 790,000, an overrun of 90,500. The final account is 111,660 worse than that, because overheads and profit and the diversion's time cost were never in the tracking.
A saving on one provisional sum does not fund an overrun on another unless someone decides it should. The 150,000 of lighting that was never instructed is a real saving; reporting the three sums as one pot hides that the diversions alone ran 307,550 over.
| Utility diversions expended, net | Adjustment |
|---|---|
| 400,000, exactly the sum | −22,560 |
| 500,000 | 83,440 |
| 612,000 | 202,160 |
| 700,000 | 295,440 |
Even when the diversion costs exactly its provisional sum, the account does not net to the lighting saving of 150,000: the 28,500 landscaping overrun, the OH&P on all the expended work and the 3 weeks of preliminaries take 127,440 of it back. Time is the other lever. With no delay the adjustment is 143,330; with 6 weeks it is 260,990. Each week of an undefined sum's delay costs 19,610 with OH&P, which is why the programme effect of a large undefined sum belongs in the risk register, not only its value.
Comparing net to net. The provisional sum is a number in the contract sum; the expenditure is valued under the contract's valuation rules, which add OH&P. Tracking the sum against the subcontractor's invoice understates every overrun by the OH&P percentage at least, and by the preliminaries on undefined sums.
Paying preliminaries on a defined sum. Allowing the contractor's 2 weeks on the landscaping would add 39,220 and take the adjustment to 241,380. A defined sum is defined precisely so that its time is priced at tender.
Getting the base wrong. If the contract summary had added OH&P on top of the provisional sums, the omission would be 837,400 rather than 790,000, and the adjustment 154,760. Read how the sums were carried into the contract sum before omitting them.
Provisional sums are one of the lines the book traces from contract sum to final account, and the free workbook for this case on the Construction Cost Control companion page runs their release as one of its six sensitivities. How OH&P and preliminaries are built into the contract sum in the first place is worked in how to calculate preliminaries and OH&P in a contract sum, and the reserve that should sit above the sums in how to calculate construction contingency from a risk register.
A defined sum describes the work, its quantity and timing, so the contractor is deemed to have priced its programme and preliminaries; an undefined sum does not, so the work is valued like a variation. In the worked case 3 weeks of preliminaries on an undefined diversion add 58,830, while 2 weeks claimed on a defined landscaping sum, 39,220, are rejected.
Usually yes, at the contract's percentage, because the instructed work is valued like measured work. On 880,500 of net expenditure at 6.0 per cent that is 52,830. Check whether the contract summary already added OH&P on top of the sums: if it did, the amount omitted is 837,400 rather than 790,000.
Arithmetically yes, in the final account total, but report them separately. Here 150,000 of feature lighting was never instructed, a genuine saving, while the utility diversions moved the account by 307,550. Netting the two shows +202,160 and hides which sum drove the overrun.
This article is one calculation from Construction Cost Control. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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