Project budgets

This guidance details the tasks, legal requirements, and responsibilities for project managers to manage project budgets.

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  • Boards
  • Principals and Tumuaki
  • Project Managers
  • Project Control Group


The project manager is responsible for budget management for school property projects.


The board will be provided with funding for its property project from one of the Ministry’s capital funding programmes. The budget will be an item in the project brief.

As the project manager, you manage the budget, which involves:
  • creating a budget for the project
  • advising the board about factors that may affect the budget, like site conditions
  • keeping the board informed of the status of the budget at all stages of the building project
  • keeping the project within budget
  • advising the board what to do if the project is going over budget
  • getting board approval and paying the project invoices.
The project budget must include all project costs (excluding GST) and these are:
  • construction costs, including prime cost and provisional sums
  • all consultants' fees
  • local council consent charges
  • a contingency sum to cover any unexpected costs during construction.

Manage estimates and provisional sums

The contract must clearly define both prime cost and provisional sums and what work they apply to. Before spending these sums, communication between all parties is essential. The project brief should set out the process for spending these sums.

Firm cost estimate

Work with a quantity surveyor to help create the budget for the project. A quantity surveyor trained in construction methods and costs can use the design drawings to work out the materials and labour needed and costs involved.

Many factors can affect the budget, including:
Site conditions Is there adequate access for construction vehicles?
Site and building services Can the project be connected to the existing electrical system or are new connections needed?
Design and compliance issues Will the project affect neighbouring properties?
Construction issues Are there any health risks, like asbestos or lead-based paints?

Work with the quantity surveyor to make an assessment that's as comprehensive as possible. However, some conditions can't be foreseen. The contingency sum is set aside for this reason.

Prime cost sum

The budget may include a fixed prime cost sum for smaller costs such as hardware and light fittings. With the board, choose items as needed during the project based on this budget.

Provisional sum

The budget may include a provisional sum, which is an estimate if the cost of something is unknown. For example, the school may not have decided what type of heating it wants. But it's best to avoid provisional sums if possible. They can add expensive extras to the budget.

Pay invoices

Getting an advance to pay the design consultant’s fees

If the project will cost more than $100,000, ask for board approval to apply to the Ministry for a 10% advance of the project budget to pay the design consultant. After the design phase is completed, there can be a long delay before construction starts and the board can call down Ministry funding.

We won’t advance these fees unless all of the following conditions are met.

  • The total project must cost over $100,000 of Ministry funds.
  • You must provide a scope of works and a timeline for releasing the fees.
  • The project must be in the school’s current 10 Year Property Plan (10YPP).
  • There must be an approved project budget.
  • You, the board and the Ministry must have approved the project brief, which must include performance targets.
  • The Ministry’s procurement process must be followed as appropriate for the type of project.
  • You must use the advance on the design consultant’s fees.

If the project doesn't go ahead the board must repay the advance to the Ministry. We don’t advance designers’ fees for projects under $100,000 because they're likely to proceed more quickly.

Applying for the advance

To apply for an advance, prepare:

  • a fees release form
  • a tax invoice from the board.

The fees release form includes a declaration which must be signed by a board representative with appropriate delegation. In making the declaration the representative is certifying that the board will:

  • undertake the project described in the application
  • repay the fees advanced if the construction doesn't go ahead
  • attach a tax invoice that we can use to pay the advance
  • follow the Ministry’s project management requirements for your project.

Ministry’s payment of invoices

We'll pay invoices immediately if all the documentation is correct. All invoices should include the school’s:

  • terms and conditions
  • bank account details
  • unique invoice number.

During the construction period, we pay invoices up to 90% of the project’s value. We keep at least 10% as a Retention sum that we only release when you meet certain requirements.

Visit our Project management forms page for an invoice template.

Legal requirements for paying construction invoices

The Construction Contracts Act 2002(external link) sets out fair and equitable procedures for paying construction contract invoices.

The Construction Contracts Act:

  • protects sub-contractors against inequitable payment terms and practices of anyone higher up the contractual chain
  • has quick and simple dispute resolution procedures
  • has remedies for recovering money due under construction contracts.

The Construction Contracts Act states what payments can be withheld from a contractor. The board may want to withhold a payment, for example, if the quality of work is poor. Check what you can do under the Act before taking this step.

For more details visit the Consumer NZ(external link) website.

Manage cashflow

A successful project is completed within the approved budget. To control the budget, you must control the project’s scope and schedule.

Manage the cash flow by:

  • matching payment dates to when the board will receive money from us
  • calculating how much money is needed to pay consultants and contractors
  • preparing a schedule showing when progress payments are made and the amount
  • checking payment claims are correct — that is, the work is done and to the specified standard
  • budgeting any variations against the contingency sum.

Adjust the budget

If the project looks like it is going over budget, you'll need to talk to the board and the board’s Ministry advisor. Options to manage any overspend may include:

  • using uncommitted funds from board funding
  • working with the design consultants to re-scope the project, identifying ways to reduce costs
  • asking the board to review its 10 Year Property Plan (10YPP) to re-prioritise other work.

We'll  only increase the budget if it goes over because of something unforeseen, like finding asbestos.

Use the contingency sum

The contingency sum cannot be used on any other work until it is clear it will not be needed for unexpected costs. It cannot be used to:

  • fix poor planning
  • upgrade the project once it is accepted, such as to buy better quality products or add extra work.

We need to pre-approve the contingency sum and the board will have to account for it at the end of the project.

The board can only spend the contingency sum on the project that it’s allocated to. It must return any unspent funds, including the contingency sum, to the Ministry at the end of the project.

Receive the retention sum

We'll release the 10% retention sum when we receive:

  • a copy of the Code Compliance Certificate
  • the Occupancy Use Certificate
  • the Construction Observation Certificate
  • confirmation that all outstanding requirements for the project have been met.

The retention sum can be considerable for a very large project. For example, it would be $700,000 if the value of the project was $7 million.

You can ask the board to contact the school’s Ministry property advisor to apply for a smaller retention.

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