Understanding pricing and WHY some are more expensive than others
Would you say this sounds familiar? You are ready to hire a builder for your project, you’ve sent enquiries to several companies for pricing and when you have received then in a week or two. Great! Now all that’s left is to go through them and choose a good candidate based on quality and price. BUT, why is it that you have such a selection of prices? Shouldn’t they be all in one ball park?
Well, actually NO! Often enough you’ll be comparing apples with oranges without even realising. What we mean to say is that companies or different sizes have different expenses and salary structures. If you found a local builder who has few people in his team, the chances are that he no overheads related to renting an office, equipment or staff. In short terms it’s great because you pay less, however if you think ahead and try to mitigate the risk then it’s not all that great. The essential part of planning and managing won’t be as good unless you are very lucky. Required insurances is another issue where the covers might not be sufficiently enough to guarantee the works that are being undertaken. A recent policy taken in 2019 would cost the builder circa £3000 which would include employer’s liability, public liability and professional indemnity. Not everyone is craze about the prospect of spending thousands of pounds on things that don’t matter right this very moment.
Did you hear the word ‘overheads’? What does it actually mean? This can sometimes sound like an excuse when contractors justify costs, but it’s a real thing. It means that the company has things like business premises, rates to pay, vehicles, office staff and equipment (as mentioned earlier), marketing, sales and everything to do with business that is behind the scenes. Someone needs to pay this and normally that is the customers. On the other hand, you get to enjoy using a well-structured company with management, quality control and excellent work ethic. I would like to say that this is a given but unfortunately it isn’t.
‘Preliminaries’ is another word that often raises eyebrows when comparing costs with one another, as these can fluctuate wildly. In essence, this is a section where you are supposed to add all the running costs on site such as plant, machinery, rubbish removal, management, scaffolding and other professional fees. The reason why the costs can be different is because some people are very good in fooling themselves that they can do it much cheaper only to realise half way that this is impossible and then having to go back to the client to plea or make a cockamamie story about something not being included even though it should have been.
The rates and salaries will vary depending on who they have on the payroll, with a rule of thumb is that the cheaper they are the highly is the likelihood that the quality will suffer. There is a fine line between reasonable pricing and made up costs that don’t represent the reality of the situation.
The allowances for kitchens, bathrooms, tiles, worktops etc can be very different and so it’s crucial you pay attention to what is being put by the contractor, as if it’s too small you will go over the budget or if it’s too high, you will need to ask for cost reduction which you might not get, subject to the contract you signed.
In conclusion, stay vigilant and check thoroughly as otherwise you might be under the impression that you took the best deal on the table and it will be painful to know if you’d find out later, that actually that wasn’t the case.