The good news is that there is currently less speculative development work around, and so contractors are likely to be paring down their margins to ensure they keep a steady flow of work, which means that quotes should be both easier to obtain, and more competitive. However, comparing quotes from several builders is not straight forward, as price is far from the only variable — you should never base your judgement on price alone.
Everyone’s dream is to get their building project completed in the shortest possible timeframe and on budget. This ambition is achievable, but usually at a price, and usually only if you hire a main contractor with a large well-organised workforce, good experienced project managers, and if you have a set of accurate drawings and specification documents with every detail finalised.
Whilst this level of organisation will allow your project to progress as near as possible like clockwork – and you will have the security of a watertight formal contract with penalty clauses for late completion – this is a very expensive way to build. At £2,000 – £3,000/m² for new build work, plus 7-12% in supervising architect’s fees, this route is well beyond what most self-builders would be willing, or are able, to pay.
At the other extreme of the builder market is the small contractor who may have at most two or three employees on his books, with the bulk of the building trades undertaken by a network of subcontractors that they can pull in, as and when they need to.
They, too, will be able to provide you with a quote for your new home, and will agree to work to some form of contract. With smaller overheads to maintain, and a less expensive workforce, the smaller contractor’s price is likely to be considerably lower than a large contractor’s — perhaps £1,200 – £1,800/m² for new build work.
The quote you receive, however, is unlikely to be anywhere near as detailed as the one provided by the main contractor. The larger firm will almost certainly have used a quantity surveyor to work out the price to the last minutiae. The smaller contractor is more likely to have relied on their experience to come up with estimates for each aspect of the project, making the two quotes difficult to compare.
Whichever route you choose, you should end up with the same house. Go with the cheaper price and you will usually save money, but the downside is that the job is likely to take longer, depending on how much other work the contractor has on at the same time, and how busy – and reliable – the subcontractors that they depend upon are.
These two examples illustrate some of the reasons why prices for the same work can vary so enormously, but there are many others that you should take into account when comparing quotes.
Getting a Quote
To get an accurate price, you’ll need to supply builders with lots of information
The starting point is inviting builders to quote for your project — as opposed to giving you an estimate of the cost. A quote is a more binding price calculated using the information you, or your architect, provides. A builder will not be able to produce a quote until you have full plans and a detailed specification. The documents required by a builder in order to prepare a quote, known as the ‘tender documents’, need to include the following information:
- A full set of all plans and drawings
- Specification documents with as much detail as possible
- Details of any materials you will be providing
- Details of any work you will be handling or subcontracting
- Details of any contract you intend to use
- Details of any preliminaries (demolition, site clearance etc.)
- The format you want the quote to take
Why Quotes Vary So Much
Contractors’ prices can often bear little resemblance to each other — here’s why
- Contractors may vary their mark-up/profit margin according to whether or not they want the job, depending on how busy they are, the complexity of the project, what sort of client they think you will be (easy or difficult), and in some cases what they think you can afford to pay
- Contractors make allowances for Provisional and Prime Cost Sums (see below) in different ways and that can distort the final figure
- Labour rates will vary according to the size of the business and whether trades are employed or self-employed
- Overheads (offices etc.) will be higher for larger firms
- Some contractors pare their price down to get the job and later exploit loopholes in your drawings or specification to charge for variations — otherwise know as ‘extras’ that inflate the final price you pay
- Contractors handle the pricing of variations to the contract – the changes you make or which turn out to be necessary – in different ways and this has cost implications
- Some contractors use quantity surveyors, others price work themselves
- Some use standard measured rates (standard average labour and material prices)
- They may interpret the plans, specification and quantities differently and with differing degrees of accuracy
- They may include exclusions or other special conditions
- Some contractors work together (compare quotes) to create a bias in the process to fix prices locally
- Some may include an insurance-backed guarantee in their quote
- Some will include allowances to cover any penalty clauses in the contract you choose to use
- Some inexperienced contractors may make serious omissions
Quotes vs Estimates
A quotation (quote) is a fixed price that can’t be changed once accepted by the customer. An estimate is an educated guess of what a job might cost, but it isn’t binding. You’re looking for quotes based on full specification documents and plans, as opposed to estimates.