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Build the quotation from Defined Cost, not your usual rates

An NEC quotation is assessed as the event's effect on Defined Cost plus the Fee, using the cost components the contract lists. A quotation at your usual rates, or a single lump sum, is the easiest kind to reject. Build it from the people, equipment and materials the event needs, show the forecast and its assumptions, and add the Fee as the Contract Data states.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

Why it matters

Defined Cost is the contract's own measure of cost, built from the components its cost schedule lists. Your rates carry your overheads, profit and output assumptions, and the contract already pays for some of that through the Fee. So a quotation at rates looks inflated to the person assessing it, and a single figure gives them nothing to check. Either way, the easy answer is a request to revise, or their own assessment. A quotation built from the cost components, with the Fee added once and the assumptions written down, has to be dealt with line by line. If you and your main contractor agree to use rates instead, put that agreement in writing.

How to do it

  1. Check the main option and the cost schedule that applies before pricing anything. Options A and B use the short schedule, and the cost-based options use the full one.
  2. Forecast the resources the event needs, people, equipment, materials and any subcontractors, and cost each one as the schedule says, not at your selling rates.
  3. Keep actual cost to date and forecast cost apart, and write down every assumption the forecast relies on.
  4. Add the Fee once, at the percentage in the Contract Data, and show the sum.

Example

Illustrative example. The scenario and figures are invented.

The facts

A mechanical subcontractor on an Option A NEC subcontract is asked to quote for rerouting 60 metres of pipework around a new beam. Its first attempt prices the work at its usual installed rate of £410 a metre, £24,600.

What happens

  1. The price is rebuilt from the components. The fitters go in at their cost for the 180 hours forecast, the access tower at the listed equipment rate, and the pipe and fittings at invoice cost.
  2. The forecast rests on stated assumptions: the route as drawn on the marked-up section, work in normal hours, and no other trade in the ceiling void.
  3. The Fee is added once at the Contract Data percentage, and the build-up totals £21,900.

The outcome

The main contractor accepts the quotation as sent. The rate-based version carried overheads and profit the Fee already pays for, and invited a rejection and an assessment by the other side.

To have this set up for you, see our Compensation Event Loss Prevention service.