The Price Is the Promise
When you submit a tender or provide a quote, you’re making a commitment — subject to the terms of your contract — to deliver the specified work at the specified price. Pricing too high loses you the work. Pricing too low wins work that loses money. Getting the pricing right — consistently — is one of the most important skills in construction business management.
Many construction businesses price based on intuition, experience, and gut feel. This approach works when experienced estimators have deep knowledge of the work being priced and when conditions are stable. It fails when conditions change, when the work is outside the estimator’s core experience, or when the intuition-based price has accumulated systematic errors that haven’t been identified because job costing is not rigorous enough to detect them.
Takeoff and Quantities
Accurate pricing starts with accurate quantities. The takeoff — the process of measuring the work from the drawings and specifications — is the foundation of the estimate. Errors in quantities cascade through the whole price: undercount the concrete by 20%, and your price for the whole concrete package is 20% light. Developing systematic, methodical takeoff processes that catch errors before they become problems is fundamental to pricing accuracy.
Quantity surveying software — Buildsoft, Buildxact, CoConstruct, and similar tools — can speed up takeoff and reduce arithmetic errors. For many small builders, these tools represent a worthwhile investment in pricing accuracy and the professional presentation of estimates.
Overhead Recovery and Margin
A price that covers direct costs — materials, labour, subcontractors — but doesn’t recover overhead and profit is a price that’s too low. The overhead recovery rate — the percentage added to direct costs to recover head office costs, vehicles, insurance, management time, and all the other costs of running the business — needs to be calculated and consistently applied. Many builders underestimate their overhead because they don’t systematically track all the costs of running the business.
Knowing When to Walk Away
Not every tender is worth winning. Work that’s badly specified, with a difficult client, on a challenging programme, at margins that don’t justify the risk — this work should be priced to lose, or declined entirely. The discipline to walk away from bad work is a mark of business maturity. Chasing every tender regardless of suitability is a recipe for winning work that damages your business.