Quoting a rate you can live with

A rate is not a price. A price is what you say. A rate is a promise to do a described piece of work, in described conditions, for a described sum, for as long as the job lasts.

Most contractors who lose money on a job did not quote the wrong number. They quoted a number that was right for a set of conditions nobody wrote down, and then the conditions changed.

This is the structure of a rate from the contractor's side, and the conditions that have to travel with it.

What is actually inside a rate#

Build it in layers. Each layer is a real cost that somebody pays, and if it is not in the rate, it is being paid out of the profit.

• Material, with wastage. Not the quantity in the drawing. The quantity you will buy, which is larger, and by how much depends on the item, the handling and the site — the ways that gap opens are in wastage on site.
• Labour, with productivity. A gang's output per day in these conditions, not in ideal conditions. Height, access, congestion and the weather all move it.
• Plant, including its idle time. A machine on hire is paid for on the days it works and on the days a front was not ready.
• Transport and lifting. Getting material to the site is one cost. Getting it to the twelfth floor is a different one, and it is the one that gets left out.
• Scaffolding and shuttering, with repetitions. These are bought once and used many times. The number of repetitions you assume is the single most sensitive assumption in most rates, and it is usually optimistic.
• Consumables and supervision. Small individually, never small in total.
• Overheads and finance. Site establishment, head-office share, and the cost of money for the period between spending it and being paid.

Then retention, which is your money held for a long period after the work is done, and profit, which is what is left if every line above was honest. The retention mechanics are worth knowing precisely before you price them: retention money.

The two everybody forgets#

The cost of money while the bill is outstanding. You buy material, pay labour weekly, submit a bill, wait for measurement, wait for certification, wait for payment, and then wait longer for the retained portion. That gap is funded by somebody, and if it is not funded by the rate it is funded by your overdraft or by your suppliers' patience. A rate that would be profitable at immediate payment can be loss-making at a long cycle, at exactly the same number. Price the cycle, not just the work.

The cost of an item's own quality control and rectification. Testing, sampling, the inspection that fails, the patch that has to be cut out and redone. Every trade has a rectification rate that the people who do it know and never write down. It is not a contingency. It is a normal, recurring cost of producing acceptable work, and it belongs in the rate the way wastage does.

The conditions attached to a rate#

A rate without conditions is an open-ended promise. Five things should travel with every quoted rate, in writing, on the same page as the number.

1. What it excludes. Named, not implied. Scaffolding, lifting, dewatering, cutting and making good, final cleaning, testing — each is either in or out, and "not mentioned" always resolves in the other party's favour.
2. What it assumes about access and continuity. A clear front, handed over in a stated sequence, with continuous work. A rate priced for a continuous run and executed in interrupted patches is a different rate.
3. How long it stands. A validity period, after which it is re-quotable. Without one, a rate quoted at tender is still being applied to work executed years later.
4. What happens if quantities move. A stated variation of quantity clause: beyond some agreed departure from the tendered quantity, the rate is open to review. Both directions, because a quantity that collapses hurts as much as one that multiplies.
5. What happens if the specification changes. A different brand, a different grade, a different finish standard is a different rate, and saying so at quoting time is far cheaper than saying it later.

The traps#

A rate quoted in one unit and measured in another. Per running metre quoted, per square metre measured. Per tonne quoted, per quintal measured. This is the quietest and most expensive error available, because both documents look completely ordinary — see the unit of measure.

A lump-sum item with open-ended scope. "Miscellaneous steel work" or "finishing as required" is not an item, it is an invitation. If the scope cannot be described, it cannot be priced, and the party who wrote the ambiguity is not the party who will pay for it.

A low rate accepted because the quantity is small. Somebody shaves an item nobody expects to matter. Then the design develops, and the quantity of that one item multiplies. Loss per unit is unchanged; loss in total is now enormous. Read the schedule as a set of exposures, not a set of prices — the habit is described in reading a bill of quantities.

Idle time when a front is not ready. Your gang is at the site, your plant is on hire, and the front has not been handed over. Somebody pays for that day. Unless the work order says who, it is you — which is one of several reasons why what a work order should say matters more than the rate printed on it.

A rate accepted verbally and revised in a message. The original rate is in the order; the revision is in a WhatsApp thread. At final account, only one of the two is a document.

The short version#

A rate is material with wastage, labour with productivity, plant with its idle time, transport, lifting, shuttering across its repetitions, consumables, supervision, overheads, finance and profit.

The two most commonly missing pieces are the cost of money while you wait to be paid, and the ordinary cost of putting your own defective work right.

Then attach the conditions: exclusions, assumptions about access and continuity, validity, what happens when quantities move, and what happens when the specification changes. The number is the easy half. The conditions are what make it a rate you can still live with in the final year of the job.