Pricing of Construction Work when Providing an Independent Quantum Assessment
Whether it be assessing insurance claims, variation claims, or the remediation of defective works, a quantum expert is called upon to provide an independent subjective opinion to assist an insurer or a tribunal or, in some cases, to help parties settle a matter outside of formal proceedings.
Before any quantification can occur, a construction quantum expert needs to understand the full scope of work involved.
A detailed breakdown of the personnel, labour, plant, and materials for each portion of work activity needs to be provided by the quantum expert. Blended rates should not be used as they do not demonstrate the potential cost and can be viewed as subjective.
“Price books should be avoided as they are generally only used for indicative cost plans.”
If rates from a price book are used, detailed reasoning should be provided as to why a first principal estimate cannot be provided. Activities such as scaffolding maybe difficult to price without a temporary works design, and the M2 rate for scaffolding from a price book may be useful as a guide.
The industry profit margins detailed in price books are a good reference point when applying profit if no other primary data is available. However, the quantum expert should use their own judgement and experience and investigate other sources when applying profit margins, and should not solely rely on price books.
The production rates used to determine the total cost per work activity should be explained in detail and reasoning for assumptions should be used.
When pricing materials, primary data should be referenced; for example, the price of a 20-litre paint container can be sourced from a builder’s merchant or national DIY supplier online. Speculation or assumptions that a subcontractor may obtain a “trade discount” should not be assumed and applied to the pricing unless evidence is available to support this claim.
If no primary data has been supplied to support the labour costs, a quantum expert can make a reasoned assessment on the cost of each type of trade by referring to primary data such as specific Enterprise Bargaining Agreements and modern awards to determine the salaries and oncosts. This approach is more subjective than simply stating the average rate of a painter is X or Y in the expert’s experience. Again, price books should not be relied upon as the sole source of data.
It is acknowledged that on occasions opposing quantum experts may agree that the rates contained within a price book are suitable for a particular matter.
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