Builders Jargon Decoded: Your Essential Guide to Understanding Building Terms

And that's the problem. When you don't understand the terminology being used in your building contract, you can't make truly informed decisions about what is arguably one of the biggest investments of your life.

This guide breaks down the most common building terms you'll encounter when working with a builder in Auckland or the Waikato. Our goal? To help you feel confident, informed, and in control throughout your building journey.

The Big Ones: Provisional Sums and Prime Cost Items

These two terms tend to appear most often in building quotes and contracts – and they're worth understanding thoroughly because they directly impact your final costs.

Provisional Sum (PS)

A Provisional Sum is an estimated allowance that your builder includes in the contract to cover work that can't be precisely costed at the time you sign. This might be for labour only, or for both labour and materials.

In theory, provisional sums exist to help move projects forward when certain details haven't been finalised yet. For example, if you haven't selected your kitchen benchtops or confirmed your landscaping choices, a builder might include a provisional sum as a placeholder.

Here's the catch: provisional sums are estimates. When the actual work is completed or final selections are made, the real cost is calculated – and it can be significantly different from the original allowance. If your builder has underestimated (or deliberately lowballed) those provisional sums, you could be facing serious budget blowouts down the track.

Why this matters: A building contract packed with provisional sums is a red flag. It often signals one of two things:

1. The builder hasn't taken the time to properly review your plans and quote the job accurately
2. The builder is using unrealistically low provisional sums to make their overall quote appear cheaper than competitors

Professional builders who've thoroughly reviewed your drawings should be able to provide a detailed, accurate quote with minimal (or zero) provisional sums. If your builder knows what they're doing and has done their homework, they'll know exactly what's required for your project.

Protect yourself: Before signing any contract, take a close look at how many provisional sums are included. Ask your builder to justify each one, and push for firm pricing wherever possible. The fewer provisional sums in your contract, the less risk you're carrying.

Prime Cost Item (PC)

A Prime Cost item is similar to a provisional sum, but it specifically relates to materials and products – things like appliances, tapware, bathroom fixtures, tiles, or lighting.

Essentially, it's a dollar allowance set aside for items that you haven't yet selected. Let's say your contract includes a $15,000 PC allowance for your kitchen appliances. That's your budget. If you choose appliances that cost $18,000, you'll need to cover the $3,000 difference.

Important distinction: A PC item only covers the cost of supplying that product. Any labour involved in installing it should either be included elsewhere in your contract or listed separately (often as a provisional sum).

The smart approach: Just like with provisional sums, the best way to avoid nasty surprises is to make your selections before you sign the contract. Once you know exactly which taps, tiles, or ovens you want, your builder can replace those PC allowances with actual costs — giving you a much clearer picture of your true budget.

If that's not possible, at least make sure the PC allowances are realistic. A $500 allowance for a bathroom vanity might sound great on paper, but if quality vanities start at $1,200, you're setting yourself up for disappointment (and unexpected costs).

Before You Build: The Preliminary Building Agreement

If you're working with a professional builder, you'll likely encounter something called a Preliminary Building Agreement (or Preliminary Building Contract) before you ever sign a full building contract. Builders often refer to this as the "pre-lims."

What it covers: A Preliminary Building Agreement outlines all the tasks that need to happen before your builder can provide a fixed-price contract. This typically includes:

• Engineering assessments
• Soil testing
• Finalising working drawings
• Obtaining necessary consents
• Confirming site-specific requirements

Think of it as the groundwork stage – the essential planning and documentation that allows your builder to accurately price your project.

What it costs: For a custom home, preliminary agreements typically range from $5,000 to $25,000, depending on the size and complexity of your project. Yes, that's a significant cost before you've even started building. But it's money well spent.

Why? Because this process ensures that when you do sign a building contract, you're getting a properly researched, accurately costed quote based on real information – not guesswork.

Why professional builders use them: A builder who starts with a preliminary agreement is demonstrating professionalism and thoroughness. They're not cutting corners. They're not rushing to get your signature. They're doing the work required to give you an honest, realistic picture of what your project will actually cost.

Builders who skip this step and jump straight to a "fixed price contract" often haven't done the necessary due diligence — which means you're much more likely to face variations, delays, and unexpected costs later on.

During the Build: Extensions of Time and Variations

Once your build is underway, two terms you'll hear regularly are Extensions of Time (EOTs) and Variations. Both are normal parts of the building process, but it's important to understand how they work.

Extension of Time (EOT)

An Extension of Time is exactly what it sounds like – additional days added to your building contract that push back the completion date.

EOTs typically happen for reasons outside your builder's control, such as:

• Extended periods of bad weather that prevent work from progressing safely
• Delays in receiving materials or products (especially if supply chain issues arise)
• Council processing delays
• Variations you've requested that require additional time to complete

Your original building contract will include an expected completion date. Any approved EOT simply adjusts that date to reflect the new reality.

Keep in mind: EOTs are a standard part of construction. A few wet weeks in winter or a delay in getting custom windows delivered doesn't mean your builder is dropping the ball — it means the project is responding to real-world conditions.

Variations

A variation is any change made to your building contract after it's been signed. Variations usually fall into two categories:

1. Client-requested changes

This is the most common type of variation. Maybe you've decided you'd like bifold doors instead of sliders. Or you want to upgrade your kitchen benchtops. Or you've realised you need an extra power point in the bedroom.

These changes are absolutely fine – it's your home, and you're allowed to change your mind. But they come with consequences. Each variation will typically include:

• The cost of any additional materials
• Labour costs for the extra work
• Administration fees for processing the variation
• An Extension of Time (because the change delays the schedule)

2. Unforeseen work

Sometimes variations arise because of issues that couldn't have been known at the time of quoting. This is especially common with renovations and extensions.

For example, when your builder removes old cladding, they might discover hidden structural damage or weathertightness issues that need to be addressed before the new work can proceed. If there was genuinely no way to identify these problems beforehand, the builder will raise a variation to cover the necessary repairs.

The bottom line: Variations aren't inherently bad — but they do add cost and time to your project. The best way to minimise them is to be absolutely certain about your selections and decisions before signing your building contract. The more locked-in your plans are upfront, the smoother your build will run.

Understanding Your Builder's Costs: Builder's Margin

You might notice a line item called "builder's margin" on variations or invoices throughout your project. This is simply the profit margin your builder adds to cover their business expenses, overheads, and — yes — to make a reasonable profit.

Running a building company involves significant costs: insurance, vehicle maintenance, tools and equipment, office expenses, administration, project management, and more. The builder's margin ensures they can cover these costs while staying in business.

Is it fair? Absolutely. Just like any business, builders need to make a profit to survive and grow. A reasonable builder's margin is a sign of a sustainable, professional operation.

Be wary of builders who claim to work "at cost" or offer suspiciously low margins – it often means they're cutting corners elsewhere, underquoting the job, or planning to make up the difference through variations and hidden costs.

Protecting Your Builder (and Your Budget): The Rock Clause

Most building contracts include something called a "rock clause." It's there to protect builders from unforeseen site conditions – specifically, hitting solid rock during excavation.

When a builder quotes your project, they base their excavation costs on what they can reasonably expect from site assessments and soil tests. But sometimes, despite all the planning, they hit rock that wasn't anticipated.

Removing rock is expensive. It requires specialised equipment, extra labour, and significantly more time than standard excavation. The rock clause allows the builder to pass these costs on to you if this situation arises.

Can you avoid it? Not entirely. Rock clauses are standard in fixed-price contracts, and for good reason – there's simply no way to know for certain what's below ground until you start digging.

What you can do: Make sure your builder conducts thorough soil testing and site assessments during the preliminary stage. While this won't eliminate the risk entirely, it does reduce the chances of hitting unexpected rock. You should also ask your builder about the likelihood of encountering rock on your specific site and factor in a contingency in your budget just in case.

Getting Started: Estimates vs. Quotes

Before any contracts are signed or serious planning begins, you'll likely receive either an estimate or a quote from your builder. These terms are often used interchangeably, but they're actually quite different — and understanding the difference could save you tens of thousands of dollars.

Estimate

An estimate is a ballpark figure. It's an educated guess based on the high-level information you've provided – the number of bedrooms you want, the overall size, key features like a pool or a double garage.

Estimates are useful at the very beginning of your journey. They help you figure out whether your dream home is even remotely within your budget. But that's about it.

What an estimate looks like: Typically a one-page document with a rough price range. It doesn't include detailed breakdowns, specific material selections, or labour calculations. It's meant to give you a starting point, not a commitment.

What it costs: Nothing. Estimates are usually free because they don't require much time or effort from the builder.

What it's worth: Not much – at least not in terms of binding accuracy. An estimate is a conversation starter, not something you should base major financial decisions on.

Quote

A detailed quote is a completely different beast. This is where your builder rolls up their sleeves and does the real work: calculating every material, pricing out every task, contacting subcontractors, and creating a comprehensive schedule for your entire build.

A proper quote should be comprehensive – typically 25 to 40 pages long. It should reference your working drawings, specify every inclusion, and break down labour and materials in detail. It's a document that both you and the builder can rely on throughout the project.

What it takes: Creating an accurate quote is time-consuming. For a custom home, it can easily take 50+ hours of work. Professional estimators need to be involved. Subcontractors need to be contacted for their quotes. Every detail needs to be checked and rechecked.

Because of the time and expertise required, a detailed quote from a professional builder is rarely free. You should expect to pay a fee for this service – and honestly, if a builder is offering detailed quotes for free, it's worth asking how thorough they're really being.

Red flags to watch for: If you receive a "quote" that's only a few pages long and filled with provisional sums and prime cost items, you haven't received a true quote – you've received a glorified estimate. Real quotes are detailed, specific, and based on actual data, not guesswork.

Pro tip: Before you pay for a detailed quote, ask your builder for an estimate first. Make sure your project is roughly within budget before committing time and money to the full quoting process. A good builder will always start with an estimate to make sure you're both on the same page before diving into the detailed work.

The Bottom Line

Building a home in Auckland or the Waikato is a significant undertaking, and the language used in the industry can feel deliberately confusing at times. But it doesn't have to be.

Understanding these key terms – from provisional sums to variations, from rock clauses to the difference between estimates and quotes — puts you in a much stronger position. You'll be able to ask the right questions, spot potential red flags, and make informed decisions that protect both your budget and your timeline.

At Our Projects, we believe that transparency and clear communication are just as important as quality craftsmanship. If you ever come across a term or clause in your building contract that doesn't make sense, don't hesitate to ask. A professional builder should always be willing to explain things in plain English – because this is your home, and you deserve to understand every step of the process.

Ready to start your building journey with a team that values transparency and clarity? Get in touch with us today and we'll walk you through every step – in language you actually understand.