Ever wondered how a Commercial Builder prices for a project? Does it seem like the numbers are plucked from thin air? Why can’t they price on a square meter rate? Well, let’s break it all down.
First of all let’s address the “square meter rate price”. As Builders it would be very misleading to provide someone with a price based solely on the square meter rate. Different projects have different specifications, therefore your inclusions and the quality of them will alter the price of a build project. If it was an empty space that required no fit-out, fixtures or anything internal, then a shell could be priced per square meter, but no one is looking to build an inhabitable box right?
Another reason not to “shop around” for a square meter rate is because if you are given a rate that seems low you are more than likely talking to a Builder who may be of a lower standard.
So let’s just put the “square meter pricing” to bed and move on to how we actually price.
The first phase.
As Builders we rarely have an “on the books” trade base. Our Sub-contractors are not employees, we don’t issue employee contracts, rather Purchase Order contracts.
So when pricing a project the Builder out sources the pricing to its external trade base. When plans and specifications are ready for pricing, they are sent on to the sub-contractor, for an example let’s use the Plumber. Even though a Builder has great knowledge of all aspects of construction and the works their Sub-contractors undertake, a Plumber will provide an accurate quotation.
The same applies to other all the other Trades, they will evaluate the documentation and price accordingly. Within their pricing they have accounted for materials, labour, time and of course their profit margin.
The next stage of the pricing begins when all quotations have been received. It is then that these quotes are analysed to make sure all is included for and that the price submitted is not exuberant (or too low as this may be an indication that something has been missed).
A good Builder should know from experience the “ball park” figure of each scope of works so it shouldn’t take long to review quotations.
So where to next?
The next stage of pricing is where the Builder works out what it is going to cost him to build. Here we are looking at how long the project is expected to take, which contributes to how long a site supervisor is needed to run the project, if and how much scaffolding may be needed, do we require a site office set up and any other overheads are accounted for. A Builders’ profit margin is added and that will become the end price.
Now, the profit margin that is entirely at the Builders’ discretion, but trying to bank a big piece of pie from a project could see a Builder lose the potential job. The economic climate will have a lot to do with price fluctuations and generally the Trade and Supplier prices reflect these conditions.
Plucking from thin air?
To address this and to evaluate a Builders’ price, sourcing at least three quotes will most likely be sufficient. When there is a vast difference between quotes this can mean a couple of things. The Builder at the highest end may have interpreted the documentation differently and may have made allowances for items that do not form part of their scope of works, or the Builder with the extremely low price may have completely missed something.
Most importantly, when comparing your three quotes and the prices are similar, or even if they are not, it would be advisable to read the inclusions as you need to ensure you are receiving apples for apples. Never just review the bottom line as the Specifications detail exactly what you will be receiving for that price.
If you are in the market for a Commercial Builder and require a competitive and transparent quotation, get in touch with us. Our friendly team members are ready to answer your call (08) 6180 3853 or if you want to find out more, visit our Gallery & Services on the home page of our website.