, Building
You priced it at £184,000. The job went at £161,000. You were both looking at the same drawings, standing in the same yard, buying from the same merchants. One of you has priced something the other has not, and if it was not you, somebody is about to build that job at a loss.
Tendering is where construction businesses are made and lost, and very little of the outcome is decided by how well you build. It is decided months earlier, by whether the number on the bottom of the page reflects the work.
Take-off before feelings
A price built from a walk round the site and a sense of what jobs like this usually cost is a guess with a decimal point. It is also how most small contractors price, and it works until the day it does not.
The alternative is measurement. Quantify the work from the drawings and specification, item by item, then price each item with labour, materials, plant and waste separately. The RICS New Rules of Measurement give a structure for this, with NRM1 for order of cost estimating and NRM2 for detailed measurement and works procurement, and you do not have to adopt the whole system to benefit from its discipline of measuring before pricing.
Three things fall out of doing it properly.
You get a price you can defend when the client asks why. You get a document you can use later when there is an argument about whether something was included. And you get feedback, because after the job you can compare what you priced against what it took, which is the only way an estimator ever improves.
Preliminaries are the job you forgot to price
Preliminaries are everything that is not a measured item of work: site set-up, welfare, scaffolding, temporary works, supervision, plant standing, skips and waste, power and water, insurance, security, and the time of the person running it.
They are the most common source of underpricing, because they are invisible on the drawings. Nobody forgets to price the blockwork. Everyone forgets that the site agent is there for fourteen weeks whether the blockwork takes ten or twenty.
Welfare is not optional. Schedule 2 of the Construction (Design and Management) Regulations 2015 sets out what has to be provided: sanitary conveniences, washing facilities, drinking water, changing and rest facilities. That is a cost per week from day one.
CDM 2015 brings other priced consequences. Where there is more than one contractor, the client must appoint a principal designer and a principal contractor, and the construction phase plan has to exist before work starts. A project is notifiable to the Health and Safety Executive on form F10 if construction work is scheduled to last longer than 30 working days and have more than 20 workers simultaneously at any point, or exceeds 500 person days. Higher-risk buildings bring the Building Safety Act 2022 gateway regime and the Building Safety Regulator into the programme, and that is a duration risk as much as a cost risk.
Price preliminaries by duration, not as a percentage. Then remember that if the programme slips, most of them keep running.
The margin you need and the margin that wins
Know the difference between mark-up and margin, because a surprising number of tenders are lost or ruined on it. Adding 20% to cost gives you a margin of 16.7% of the selling price. If you need 20% margin, you add 25%.
Then set the number you need from your own overhead. Total annual overhead divided by expected turnover gives the percentage every job must carry before it contributes anything. A business with £140,000 of overhead expecting £1.4m of turnover needs 10% just to stand still, and any job priced at 8% is being subsidised by the others.
Sometimes you take the low one anyway, and there are honest reasons: keeping a good gang together through a quiet quarter, buying a relationship with a client who has a pipeline, covering fixed overhead that you cannot shed. Those are decisions. The danger is making them by accident, job after job, and calling it a market.
Walking away is a skill with a cost
The hardest discipline in tendering is not sharpening the pencil. It is declining.
Signs that a job should be declined rather than priced low: a scope you cannot pin down, a client with a history of arguing about valuations, a programme that only works if nothing goes wrong, a contract with amendments that shift risk to you without payment, retention terms that tie up more cash than the job earns, and a bill of quantities that is really an invitation to guess.
Read the contract amendments before you price, not after you win. Standard JCT and NEC forms allocate risk in a known way. The schedule of amendments is where a client's solicitor moves it, and clauses about ground conditions, delay and the valuation of variations are worth more than any line in the pricing document.
Tender qualification is the middle path. Price the job, and state clearly what you have assumed and excluded: ground conditions, asbestos, working hours, access, attendance on others, the extent of making good. A qualified tender that is honest about its assumptions is worth more to a sensible client than an unqualified one that will produce a claim in week six.
The pricing you do after you win
The estimate is not the budget. Convert it into a cost plan with a programme against it, so that you can see week by week whether the job is tracking. Compare committed cost against the allowance as orders are placed, not at the end.
This is where the most common failure of small contractors happens. The tender said £27,000 for materials. Nobody checks the actual spend until the last invoice arrives, by which time the answer is £34,000 and the conversation is archaeology rather than management.
Construction consistently records more company insolvencies than any other sector in the Insolvency Service's published statistics, and the classic pattern is not a single bad job. It is several jobs priced slightly thin, run without cost control, funded by the deposits on the next ones.
Where this shows up in the game
Construction firms arrive in Business Baron with the Property & Construction Track, an add-on to the full game. Winning work and making money are separate things, and a job won at the wrong number still has to be built. Capacity is finite, so taking one contract means declining another.