Your Build Went Over Budget — Who Pays for the Overrun in New Zealand?

sp8002
May 31
4 min read

Who pays a building cost overrun depends entirely on what caused it. The first job is to split the overrun into buckets — variations, allowance adjustments, fluctuations, and builder under-pricing — because the answer is different for every dollar.

By Steve Parker · Trueworks · NZ construction contract review · 6 min

What you'll learn

The four things a cost overrun is usually made of
Who generally pays for each — and why
How to split your overrun into buckets before you argue

Quick answer: Who pays a building cost overrun in New Zealand depends on what caused it. Genuine variations you requested are yours; provisional-sum and PC-sum adjustments are yours up to the actual cost plus the agreed margin; ordinary material price rises on a fixed-price contract are generally the builder's; and a builder who simply under-priced the original scope generally cannot pass that on. The first job is to split the overrun into those buckets, because the answer is different for each dollar.

"The build went over budget" is not a single problem with a single answer. An overrun is a sum of different causes, and each cause has a different owner. Treating the whole figure as one number — yours to absorb or the builder's to wear — is how both sides end up in an unnecessary fight.

An overrun is not one thing

| Cause of the overrun | Who generally pays | Why | |---|---|---| | A variation you requested | You | A change you asked for, priced through the variation procedure | | A provisional-sum or PC-sum adjustment | You, to actual cost + the agreed margin | An expected allowance adjustment, not a fault | | A material price rise (fixed price, no fluctuations clause) | The builder | A fixed price carries this risk | | The builder under-priced the original scope | The builder, generally | The agreed scope was priced; mis-pricing it is the builder's risk | | A builder-initiated change to fix their own error or omission | The builder, generally | Not a change you requested |

Split it into buckets

Take the gap between the contract sum and the final account, and assign every dollar to one of the rows above. Most overrun disputes shrink dramatically once each line is in the right bucket — because it turns out a large part of the "overrun" is legitimately yours (variations, allowance adjustments) and a part is not (fluctuations, under-pricing) and you are now arguing about a much smaller, clearer number.

The "we underestimated" overrun

On a fixed-price contract, the builder's mis-estimate of the agreed scope is the builder's risk. That is precisely what the fixed price bought you. A builder cannot generally convert their own under-pricing into a charge to you. This is different from a variation, which is a change to the scope itself.

The allowance-adjustment overrun

Provisional-sum and PC-sum adjustments are legitimately yours — up to the actual, substantiated cost plus the single agreed margin. If they have picked up a second margin, that part is open to question. The detail is in our guide to provisional sums, PC sums and variations.

Send Trueworks your contract and the line in question. You receive a written, code-cited assessment of whether it was identified, notified, and priced the way the Building Act and your contract require — a second opinion you can put straight in front of your builder. NDA available; files NZ-hosted. → Email steve@trueworks.co.nz
or start at trueworks.co.nz

Not sure a variation or charge on your build is justified?

What to do

Get the final account itemised, line by line.
Assign each line to a bucket.
Question any fluctuation or under-pricing dollars on a fixed-price contract.
For large or contested lines, get a written, clause-cited read before you pay — then negotiate from a documented position. If it does not resolve, see how to dispute a building variation.

FAQ — Building cost overruns in NZ

My builder underestimated the job — do I have to pay the difference? On a fixed-price contract, generally no. Mis-pricing the agreed scope is the builder's risk. The exception is genuine variations and any explicit fluctuations clause.

Are material price rises my problem? On a fixed price with no fluctuations clause, generally the builder's. With a fluctuations clause, the clause decides how much can be passed to you.

My builder says the overrun is "all variations" — is that plausible? Sometimes. The test is whether each variation followed the notice and breakdown rules. Variations that skipped the process are open to challenge.

How big an overrun is normal? There is no set figure. What matters is not the size but whether each dollar sits in a bucket you actually owe.

Where do I escalate if we cannot agree? The Disputes Tribunal handles claims up to $30,000; adjudication under the Construction Contracts Act 2002 handles any amount under a construction contract. See how to dispute a building variation.

How Trueworks helps

Trueworks takes your contract sum and final account and buckets the overrun line by line — variation, allowance adjustment, fluctuation, or under-pricing — then tests each contested bucket against the contract and the Building Act. You get a written, code-cited account of which dollars are yours and which are open to question.

About Trueworks

Trueworks is built by Steve Parker — 20 years on the analytical side of NZ construction: variation reviews, contract advisory, and AI-augmented document analysis. It is the same defensible, code-cited read a quantity surveyor would give a variation, made available to the homeowners and trades on the receiving end of one. I answer every email personally during pilot phase.

steve@trueworks.co.nz · trueworks.co.nz