The contract sum is the number on the front of the contract. It is also the number most owners hold in their head for the rest of the build, which is why it causes more disappointment than any other figure on a project.
It is a starting point. The contract itself sets out the mechanisms by which it changes, and on a normal build every one of those mechanisms operates.
What moves it
Variations. Any instructed change to the scope. See variation order. This is the largest mover on most builds.
Provisional sum adjustments. The allowance comes out, the measured work goes in, and the difference lands on the contract sum. See provisional sum.
Prime cost sum adjustments. The same, for chosen items. See prime cost sum.
Remeasurement, where the contract is on a remeasure basis and the actual quantities differ from those billed.
Fluctuations, where the contract provides for movement in material or labour prices. Many small contracts are fixed-price and do not.
Loss and expense claims, where the contractor has been delayed or disrupted by something within the employer's responsibility.
The number that actually matters
Not the contract sum. The adjusted contract sum, which is the contract sum plus every approved adjustment to date.
That figure is the real committed cost of the building right now. Keeping it current is close to the entire discipline of cost control on a small build, and it is extraordinarily rare to find it maintained.
A worked version, at month five:
| Line | Amount | | --- | --- | | Contract sum | 18,400,000 | | Variations approved to date | +1,236,000 | | Provisional sums: allowed | (3,100,000) | | Provisional sums: adjusted to date | +3,640,000 | | Adjusted contract sum | 19,636,000 |
That is six per cent above contract, it is a fact rather than a feeling, and a client who sees it monthly makes different decisions from one who sees it at the final account.
What goes wrong
It is treated as a cap. It is not. It is the price of the scope as it stood on the day of signing, and the scope never stays as it stood.
The adjustments are reconstructed at the end. This is the standard failure. Nobody maintains the running figure, and the final account becomes a negotiation about what was agreed verbally in March rather than an arithmetic exercise.
Time is left out of it. An extension of the programme carries time-related preliminaries and may carry liquidated damages in the other direction. A running total that tracks cost and ignores time is tracking half the position.