Message - Re: Over-estimating the tender prices

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Posted by  Rog the Dodge on March 30, 2003 at 17:33:17:

In Reply to:  Over-estimating the tender prices posted by urbanslider on March 30, 2003 at 06:41:17:

Your question is vague in the critical details which relate to the status of the project at design development stage, who costed it at that point and whether a Cost Plan was in place to account for subsequent variations in cost brought about through increasing specificity in the design.

Often at design development stage aspects of the detail and specification are imprecise and need to be monitored right up to obtaining tenders from contractors. At the same time it's often architects, using crude generalised square metre rates, who produce outline project costs for projects which subsequently become anything but generalised. A cost plan updated at regular intervals is a way of refining the cost at the same time as refining the design and keeps the client involved in that development.

If it was your surveyor who produced the initial costing and there was no further updating undertaken then suing your surveyor will be fruitless as he/she will merely say, with some justification, that design development has added cost. Even if the project was fully costed by the surveyor just prior to obtaining tenders he/she will be able to refer to the vagaries of the market, local price fluctuations, labour shortages, the contractor's pricing methods, how the contractor takes profit, whether the contractor has a fully inclusive price and is likely or unlikely to enter into protracted claims for extras, etc., which will be difficult to gainsay. If you were responsible for the preliminary costings made available to your client then there's absolutely no way out. Own up.

In my experience cost increases tend to be generally attributable to the actions of parties at the pre-contract stage, that is, the surveyor may underestimate or infer cheaper specification where your specification is light or unclear, you will have introduced improvements to the design and the client will have asked for upgraded specification. Get a report from your surveyor and recheck your notes of meetings with your client or his/her brief.

My approach, which has been invariably successful, has been to encourage the client (who wants the design desperately, let's be clear)to revise his/her budget upwards somewhat while making some concessions at the margins of the design or specification. In reporting the overrun and promoting this approach I have found it essential to be absolutely honest about the cost increases and how they came about. This requires a review of the costing/pricing process and the attribution of responsibility for the increases, much in line with the above scenario. I could quote numerous examples of projects with budgets between 25k and 5.5m where this occured: you are not alone. And the contractor is not attempting to rip your client off: he/she needs the work just as badly as you do.

Genuine misunderstandings occur and provided clients are fully briefed they are inclined to be supportive and to negotiate to an optimum compromise position. Alright, so you might have a shitty weekend because your client's pissed off at you and he/she may refer back to the matter later in support of some other complaint, but as long as you take decisive action now, accept your responsibilities, it should not become a problem in the long run.

Clients respect honesty and your willingness to accept your professional responsibilities.

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