 Pricing (estimating) a construction project has been described as a science, an art, part luck, and for some just a guess. Getting your price right means you have to win the project with a price that is higher than your final project costs will be, meaning you’ll make a profit. But just because you have the right price (for your company) doesn’t mean that your competitor won’t have a lower price that will be profitable for them. Having a lower price than your competitors also doesn’t mean that you’ll be awarded the project since clients often look for other requirements, and they need to be convinced that you are the right contractor for their project. Unfortunately there are many contractors who submit flawed prices which have little chance of success, or worse, which can lead to the downfall of the company when the price is lower than their final project costs. But there are also many other risks that contractors don’t consider when pricing their projects, these include non-payment, inability to deliver the project to the required standards, lengthy legal disputes, health risk to employees, reputational risks, cashflow problems, and even the risk of losing out on favourable future work. #pricingconstructionprojects #constructionbids #constructiontenders Tips to successfully pricing your construction project 1. Understand your client. You don’t want to work for some clients, particularly those who don’t, or can’t pay. Check whether your client:
 2. Understand the project documentation.
3. Know the market and what other projects are coming out for pricing. Good market intelligence is essential. You don’t want to be stuck with a difficult project at a low price while you miss out on other more lucrative and easy projects that are likely to be available in the next few months. Read: Should contractors price every project? 4. Physically check the project site conditions.
5. Understand the opposition (competitors). It may not be worth pricing projects against competitors who are known to be favoured by the client, ones that have a reputation for stupidly low prices, or competitors that are in a position to deliver a cheaper project because they are working in the area or have the right equipment for the project. You may be wasting your time pricing a project which you don’t stand a chance of winning! 6. Understand the project. What is your company responsible to deliver? What will the client supply?  Despite the obvious warning signs some contractors dive straight into risky projects. 7. Identify and quantify the risks. Prepare a risk schedule. Understand how you can manage and reduce the risks. Be prepared to walk away from projects that are too risky and where the quantum of the risk event could sink the company. Read How to deal with construction risks 8. Know your company’s capabilities. Will you have the people and equipment to do the work? Do you have people with the right experience? 9. Check the available resources. Are materials, people, and equipment available? Will they be available when they are required? 10. Consider the construction methodology. Develop the best methodology taking account of your company’s capabilities, the available resources, the project site conditions, the project schedule requirements, price, safety and the client’s requirements and design. Consider alternative construction methods and products. Conclusion Some contractors take the shot gun approach to pricing projects. Aiming in the general direction of the target and hoping they snag a project. Submitting as many prices as possible, hoping that one will get them a project. Their estimators often work long hours churning out price after price, just hoping that they will have success with one submission. Unfortunately this often leads to mistakes. High prices mean it's another effort in vain. Low prices may land the company a project at a price they cannot do the work for. Rather contractors should pick the right project, then spend time and effort preparing a winning price submission. In my next article I discuss more tips for winning construction bids 10 more tips for pricing construction projects#constructionprojects #contractors #constructionmanagement Other useful articles Negative cash flow – the death for many construction companies some Reasons why projects lose money Top Tips to Cut Costs on Today's Construction Site Do you want to learn how to manage construction projects successfully
Paul Netscher has written several easy to read books for owners, contractors, construction managers, construction supervisors and foremen. They cover all aspects of construction management and are filled with tips and insights.
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15 Comments
25/11/2022 02:42:56 pm
My favorite part of this article is that it is necessary to have proper communication with your client for a proper project. Last week, my cousin told me he was looking for a reliable excavation service for their unused plot of land that would be a commercial property. He asked if I had any idea what would be the best option to consider. Thanks to this enlightening article, I'll tell him he should consult a trusted land excavation service as they can provide more information about the process. 6/7/2023 01:23:59 pm
One experience that stands out to me is when we underestimated the risks involved in a project and ended up facing lengthy legal disputes and reputational damage. It's crucial for contractors to thoroughly evaluate their clients, understand project documentation, and assess site conditions to avoid such pitfalls. These tips will definitely be valuable for contractors looking to improve their pricing strategies and secure successful projects. 6/7/2023 02:00:23 pm
One time, I worked for a client who had a reputation for delayed payments, and it ended up causing a lot of financial strain for my company. It taught me the importance of understanding the client's payment history and financial stability before committing to a project. Now, I always take the time to understand the contract terms and identify any potential issues beforehand. These tips have helped me avoid unnecessary risks and make more informed pricing decisions. 13/7/2023 07:18:02 pm
Great article! Pricing a construction project can be quite challenging, but these 10 tips provide valuable insights and strategies for success. I appreciate how the article breaks down each tip, making it easy to understand and implement in real-life scenarios. 10/8/2023 02:33:49 pm
Setting the right price in construction projects is crucial for success. These tips offer valuable guidance for effective pricing strategies. 5/10/2023 12:04:08 am
16/10/2023 06:58:36 pm
Fantastic article! Understanding the importance of accurate estimates, considering all potential costs, and staying updated on market trends are key takeaways. I appreciate the emphasis on communication and collaboration within the team, as well as with clients. Overall, a valuable resource for anyone involved in construction project pricing! 20/10/2023 07:00:55 pm
Excellent post! Pricing a construction project can be quite challenging, so these guidelines are incredibly helpful. I especially appreciate the emphasis on thorough research and factoring in contingencies. It's true that unexpected costs can really throw a project.Thanks for sharing these valuable insights! 22/10/2023 01:53:28 pm
I can't thank you enough for your thoughtfulness. You're amazing. 24/10/2023 12:24:21 am
I found these suggestions to be really helpful, especially the emphasis on accurate cost estimation and the importance of contingency planning. It's so true that unexpected costs can quickly derail a project if you're not prepared. Thanks for sharing these insights! 3/3/2024 11:00:44 am
Paul Netscher provides a comprehensive guide to pricing construction projects, offering valuable insights that go beyond just numbers. As someone who once faced the consequences of underestimating project risks, the emphasis on thorough client evaluation, understanding project documentation, and considering market intelligence resonated with my experiences. Netscher's advice to focus on quality submissions over quantity echoes the importance of strategic thinking in the competitive construction industry. 7/3/2024 09:51:02 am
Pricing construction projects can indeed be a challenging task, and these tips provide a comprehensive guide to navigate through various considerations. The emphasis on understanding clients, project documentation, market intelligence, and assessing risks resonates with my own experiences in the industry. It's refreshing to see such valuable advice shared by Paul Netscher, making this post a valuable resource for contractors seeking success in pricing their projects. 17/5/2024 10:22:15 pm
Thank you for these insightful tips! As a small contractor, I’ve experienced firsthand the pitfalls of underestimating project costs and the importance of knowing your client. Your advice on understanding project documentation and site conditions is spot on – I once avoided a major setback by catching potential issues during a site visit. Great job on highlighting the critical aspects of successful project pricing! 28/6/2024 06:07:30 pm
Fantastic post! These recommendations are quite beneficial because estimating a building project can be very difficult. I particularly value the emphasis on doing extensive study and accounting for contingencies. Unexpected expenses can, in fact, completely ruin a project.I appreciate you sharing these insightful thoughts. 13/9/2024 07:33:20 pm
This blog provides invaluable insights into construction project pricing. The practical tips and expert advice are truly helpful and will undoubtedly enhance anyone's approach to cost management. Thank you! Your comment will be posted after it is approved.
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