Skip to content
Quantsurv
Get in touch

Get the price basis written into the letter, not just the cap

A cap says how much you can spend, not how your work will be valued, so get the price basis written into the letter. Ask for your quoted rates, with a stated basis for anything the quote does not price.

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

Why it matters

A letter that states a cap and nothing else leaves the value of the work to be argued later. That usually happens once the relationship has soured. Your main contractor will then pick the lowest figure it can defend: its own order price, another subcontractor's rate, or the cap itself. Your quote shows what you asked for. It does not prove what was agreed. One sentence in the letter, tying the work to the rates in your dated quote, turns that later argument into arithmetic.

How to do it

  1. Check whether the letter says how the work will be valued. If it does not, note that as the first gap.
  2. Propose one sentence: the work is valued at the rates in your quote, identified by its date and reference.
  3. Propose a basis for work the quote does not price, such as daywork rates or cost plus a stated percentage.
  4. Keep the reply with the letter. If the point is refused, record it as open and price the risk before you start.

Example

Illustrative example. The scenario and figures are invented.

The facts

A groundworks subcontractor is sent a letter of intent for a £280,000 package, capped at £50,000, with no mention of rates. Its quote of 3 March prices the drainage and the slab, but not breaking out rock.

What happens

  1. Before starting, the subcontractor asks for the letter to value the work at the rates in its 3 March quote. It proposes cost plus 15 per cent for anything the quote does not price.
  2. The main contractor agrees by email the same week.
  3. After 4 weeks the gang finds rock under the slab. Breaking it out costs £9,200 in plant and labour.

The outcome

The rock breaking is valued at £10,580, cost plus 15 per cent, and the main contractor pays it in the next cycle. Without that sentence, the item would have waited for the final account, argued against a letter that said nothing.

To have this set up for you, see our Letter of Intent Loss Prevention service.