You are about to submit your quotation/tender/bid/price and you have to decide how much profit to add to your price. Add too much and your price may become too expensive and won't be considered by the client. Add too little and you could be much cheaper than your competitors. So what is the right profit?
The amount depends on a number of factors including:
1. The current market conditions. The more competitive they are the lower the margin will be. - 2. The other bidders. If you know who they are you may have an indication of how desperate they are for the project or what level their prices normally are. - 3. How desperate you are for the work. - 4. How confident you are in your pricing. If there is some uncertainty about the accuracy of your price you may add additional profit to cover for any possible mistakes in your price. - 5. The amount of risk. The more risk there is the higher your profit should be to recompense for the risk you are taking on. - 6.
The client's budget. You may consider tailoring your price to fit the client's budget provided this doesn't make you lose money or isn't going to make your price uncompetitive. - 7. The desirability of the project to your company such as: possible further work from the client, a good location, a prestigious project or an easy project with potential to make additional profit. - 8. Whether the project will use resources you currently have available. - 9. You may want to keep other contractors away from your client or market. - 10. You may want the project so you can enter a new market.
Adding the right amount of profit is one of the most important decisions in the tendering process.
construction management construction project management
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The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.
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