How to Control Building Costs: Provisional Sums and the 70% Rule

This article is adapted from Chapter 7 of Your Seven Step Home Extension Plan by Ashton Paul — the book that shows homeowners how to manage a project and avoid the stresses and strains of the home extension process.

Overspending on a building project is easy. It can take you by surprise, limit your ability to finish, or leave you in debt to your builder for a long time. The good news: cost control isn't mysterious. It's a handful of habits, applied consistently — and it starts with understanding what your budget actually buys.

The 70% rule: the biggest mistake you can make

The biggest mistake you can make, before anyone starts, is not knowing what your budget includes. The book's formula:

Budget = building works + contingency + professional and approval fees + VAT + your own furniture and fittings.

Worked through: £50,000 of building works + 10% contingency + 10% professional fees + 20% VAT + £5,000 of client costs = £75,000. In other words, the on-costs typically absorb around 30% of your total budget — only about 70% of your budget is spent on the building works themselves. And it cuts the other way too: every extra pound of work you add actually costs you around £1.40 once the on-costs land — more still if changes force abortive, out-of-sequence work.

Beware, too, of talking at cross purposes: building professionals generally quote net of VAT, while most homeowners think in gross figures. Mix the two and you can secretly build an overspend into your own budget. (For what extensions actually cost per square metre locally today — £2,500–£3,500/m² is the realistic banding — see our Surrey cost-per-m² guide.)

Provisional sums: how a cheap quote grows 19.5%

Here's a real example from the book of "delayed design" priced into a quote. A builder offers an extension at £46,000 plus VAT, with three provisional sums inside it:

Builder provisionals	Allowance
Kitchen supply and fit	£8,000
Electrical installation	£2,500
Doors, supply and fit, incl. ironmongery	£500

On examination, the kitchen allowance was artificially low — no appliances, no splashback tiling, no worktops. A realistic kitchen figure was £15,000. No confirmation of a fuseboard upgrade; no confirmation of door quality or handles. Adjusted honestly, Paul's assessment of the real price was £55,000 plus VAT — an instant 19.5% increase on the number that won the job.

The sting in the tail: another builder had quoted £53,000 with everything priced correctly — and was out of the picture for appearing too expensive. The low quote ties you in, the price rises "because of your kitchen choices", and the honest builder never hears from you again.

The defence is the same one that runs right through the book: don't allow builders' provisional sums or contingencies. Manage your own contingency — around 10%, and up to 15% on complex or older properties; expect to spend it, but not without a little resistance — and get the design finished before pricing, so every builder quotes on the same fully specified job.

The day-rate arithmetic — and what a too-cheap quote means

A fair price has to pay wages and keep the builder in business. The book's benchmark arithmetic runs like this: labour is around 60% of cost; three men at £200 per day including profit is £3,000 for a five-day week; add roughly 40% for materials — £2,000 — and you get a build rate of about £5,000 of work per week. In the same worked example, the builder also allows himself a week's contingency for every eight weeks of building work. (Those day rates date from when the book was written — today's rates are higher — but the method hasn't aged a day.)

Two things follow from the arithmetic:

1. Delays are expensive by definition. At a realistic weekly build rate, every idle week has a real cost — his or yours.
2. A quote far below the realistic rate is a question, not a bargain. If your builder is carrying out the works for meaningfully less than they should cost, ask yourself why — or how. He may be cutting corners, using cheap labour, avoiding tax — or he may be a complete bandit whose plan is to take as much money up front as possible with no intention of finishing at that attractive price. Whatever you do, don't ask him why he's cheaper than the others; he'll simply raise his price.

The same logic applies when comparing quotes. Given prices of £28,000, £33,500 and £36,000, most people base their entire budget on the lowest — a recipe for disaster, because very often the highest price is highest precisely because that builder allowed for everything, and the cheapest conveniently missed elements that get added back later. The safer benchmark, regardless of budget, is the middle price. In the book's example, the £28,000 quote gained £1,500 of "missed items" before the ink was dry.

Variations: written, priced, and locked down in 14 days

You absolutely cannot control project costs verbally. It can't be done. Every change — added, omitted or altered — gets written down and priced.

• Ideally your builder prices any variation within seven days, so you can make an informed decision; he'll usually need reminding, because builders do paperwork once a week at best.
• Lock prices down within 14 days, or you're running on estimates and risking your budget. If he's waiting on a subcontractor's price, ask for a ballpark or name the allowance you're making and ask him to confirm whether it's enough.
• Watch the escalation. Paul once had a builder claim £850 for "extra thick plaster"; they agreed £325. Costs will spread like wildfire if you don't treat them with respect — you do not want to discover thousands of pounds of extras you weren't even aware of.

Remember the variation account sits separate from the contract sum, exactly as we set out in the building contract post — and that pro-rata rule cuts both ways: if plastering was £25/m² in the contract, similar additional plastering should be £25/m², not a new invented rate.

Payments: arrears, retentions, and never money up front

Builders who ask for money up front should cause you concern — it's the oldest trap there is. The standard structure protects you:

• Staged payments in arrears for work actually done. Materials delivered to site aren't even valued until they're fixed in final position — half-finished piles of timber have no value to you in a dispute.
• 5% retention held from every payment during the works, reducing to 2.5% on completion and held for six months or so — the defects and rectification period, while summer-to-winter temperature swings test the works. It's not a large sum, but in 28 years Paul has found it's just enough to get a builder back to fix problems, and it has never once failed him.
• Pay on time, every time — within whatever period was agreed: 7, 14 or 28 days. If you've negotiated a prompt-payment discount, honour it; both parties should keep their end of the bargain.

And know that the claims can run the other way, legitimately. If the works overrun three weeks because of your changes, the builder has a proper claim for his site overheads — in the book's example, a Portaloo at £125 a week, a site foreman at £600 a week, plus 15% overheads and profit came to £2,500 plus VAT. Cost control includes not creating the delay in the first place.

If you're over budget: reduce scope, not standards of sense

Over budget mid-project? The book's strategies, in order of preference:

• Reduce or postpone scope rather than overspend — omissions can balance additions. (Be careful reducing a builder's contract value substantially; he could in principle claim for loss of profit on the omitted works.)
• Re-engineer the finishes: a professional decorator is often better and cheaper than the builder's team for final decorations — and smaller self-employed trades often aren't VAT-registered, which helps too.
• DIY the pleasant bits. Paul is a great believer in the painting party — a few friends, a few beverages, and the decorating done for the cost of the pizza.

Then, at the end, do the review almost nobody does: check the builder's price line by line against what was actually built. Adjust every provisional sum and quantity to actual costs, and omit any unspent contingency completely. If the flooring came in £2 per square metre cheaper than budgeted, that's a real saving across the whole floor area — builders focus on the extras and are not very good at reporting the omissions, so somebody has to. If you're apart on the final account, negotiate the whole account rather than every line — and if you're £1,000 apart, meeting in the middle beats paying someone to argue. A couple of hours of a friendly surveyor's time (say £300) has saved clients £2,000 at this stage. And if the builder has been brilliant? Paul's habit is to spend a little of the saving on a decent bottle and a case of beer for the trades. Fair is fair.

Cost control is step four of the seven — and it's the step our surveyor-led home extension service is built around, from specification through final account. The full method, with the checklists, is in Your Seven Step Home Extension Plan (£12.99).