HKIS QSD CPD

Topic:
Contractors Build Rates & Pricing
By: Jesse Wong

Background

How special of the construction industry?

Contractor as an insurance company

Contractor will be left behind when

everyone walks off

Risky business?

A story

Build up rates / costs

Labour

-How much double handling?

-What type of subcontractors?

Material

-How much wastage?

Plant

-What type? How many?

Overhead

-preliminaries (tangible) &

risks (intangible)

Profit or at cost?

Preliminary costs

Sum of insurance / Bond

Contract period-fluctuation / LD
Payment period / honouring time
Site management staff
Plant and equipment
Reputation of the client
Reputation of the consultants
Location of the site
Technology required i.e. QPME for demolition works
Government requirement i.e. contamination
Limit of retention / min. payment

Preliminary costs

Preliminaries

Furniture & Equipment

Staff

Factors to consider
when
pricing
Fully understand
the project requirement:

Site constraints
Working time
Interfacing
Site access
Neighbours
Statutory requirement
Standard of safety requirement
Utility Services
Details provided
Judgment from Contractor

Pricing strategy

Current and future market

Labour / material / currency / interest etc

Global commodities price

Contract period

Contractor input

JV

Speculating

Long / short term relationship consideration

Knowledge are
Programme of works
important

Method statement

Schedule of materials submission

Schedule of drawings submission

Design and structural calculation

Type of contract

Construction details

Predict construction risks

Think of your own home decoration

Sample case

Tender-information

Bid sum

PC & PQ

Cost building

Schedule of Provision

Indirect factors affect

Learn from experience
pricing

Update yourself

Talk to others

Keep good relationship with supplier

Keep good relationship with bankers

Keep good relationship with subcontractors

Build up loyalty of your staffs / colleagues

Be a considerate contractor

Long time to settle final A/C

Company consideration

Internal need

Company strategy

Sharing / available of resources

Financial / technical capability

Warranty / Guarantee

Foreseeable tender opportunities

Background of clients / customers

The way / time of settlement of final A/C

Reference to professional
prediction
According RLBs latest quarterly report, tender
prices in Hong Kong have stabilized after the
rapid fall between the 3rdQ of 2008

continue to rise in the 4thQ of 2009

Looking forward, the rising trend of tender

prices throughout 2010

With infrastructure projects moving, the return of

inflation and the increased activities in the
property market, tender prices in Hong Kong are
expected to rise more significantly in the second
half of the year

Tender price index vs construction

costs

Questions

When is the peak?

How to price a tender when the trend is going

up?

Are the contractors making huge profit when

the trend is down turning?

As a PQS, how to estimate the costs?

How to advise the client a saver way?

How the contractors hedge the risks?

Thank you
Q&A