Two builders give you a number for the same house and the numbers are a long way apart. Before deciding one of them is expensive, find out what kind of number each one is.
Most budget arguments on a building job are not really about money. They are about two people using the same word for different things.
An estimate is a considered opinion
An estimate is a builder's best assessment of likely construction cost from the information available at the time.
If that information is a set of concept drawings, the estimate is being built on assumptions — assumptions about foundations, about the joinery, about the level of finish, about a hundred things the drawings do not yet say. A good estimate names those assumptions in writing so you can see what has been assumed.
Estimates are useful. They tell you early whether the house you are imagining and the money you have are in the same conversation, while the design can still change cheaply. What an estimate is not is a promise.
A quote is a contract price
A fixed-price quote is prepared from completed working drawings and specifications. Once accepted it becomes the contract price, subject to any variations you and the builder agree along the way.
The important half of that sentence is the second half. A fixed price is fixed against the drawings and specifications it was priced from. Change those, and the price changes with them — that is what a variation is, and it is not a builder being difficult.
For a fixed price to mean much, the documents behind it have to be complete. Vague specifications produce a vague price, and the vagueness surfaces later as a variation.
Cost Plus is the third option
On some jobs a fixed price is the wrong instrument. Renovations, recladding and anything whose real condition is hidden until work starts are hard to price without a large allowance for the unknown — one you pay for whether or not the unknown turns up.
A Cost Plus contract charges the actual cost of labour and materials plus an agreed margin, with the invoices open to you. You carry more of the risk and you see exactly where the money goes. Neither approach is the honest one and the other the trick; they suit different jobs.
What a provisional sum actually means
A provisional sum is a placeholder. It is an amount included in the price for work that cannot yet be priced properly, because it has not been designed, specified or investigated.
Landscaping before a plan exists. Ground conditions before excavation. A retaining wall whose height depends on levels not yet taken.
When the real cost is known, the provisional sum comes out and the real figure goes in. If it costs more, you pay more. If it costs less, you pay less. It is not a cap and it was never a quote.
A prime cost sum works similarly for items you have not chosen yet — tapware, tiles, appliances, light fittings. The allowance is a stand-in for a decision you have deferred.
Both are legitimate. Both become a problem when there are too many of them, or when the allowances are set low to make a headline price look competitive. Ask what each sum is based on, and whether it is realistic for the specification you actually want.
Where budgets really move
In practice the movement comes from a short list.
The ground. What is under the site is the largest genuine unknown on most jobs, which is why a geotechnical report before pricing is money well spent.
Selections. Tapware, tiles, benchtops, appliances and hardware are where an allowance meets a showroom. This is the most common overrun and the most controllable.
Changes of mind. Every one of them is a variation. Late changes cost more than early ones because something already built has to be undone.
Time. A programme that stretches carries cost. Weather, supply and consent delays all show up here.
Statutory and consultant costs. Council fees, development contributions, engineering and design fees usually sit outside the building contract. Confirm what your number includes.
Ask, too, whether a price includes GST. It is a simple question and it has ended more than one comparison.
Before you sign
For residential building work above the threshold set in the Building Act, a written contract is required, and the builder must give you a disclosure statement and a checklist before it is signed. Read them.
The Act's implied warranties apply whether or not anyone writes them into your contract, including a period after completion in which the builder must put right defects you notify.
Then get variations in writing as they happen. A price agreed at the time is a conversation. A price agreed at the end is an argument.