Reading a building quote: what's in, what's out and what moves the price

Builders rarely tell you what a job costs before they have seen it, and for good reason: every site is different. But a quote is more than a number. It shows how the builder thinks about the work, what they have allowed for and where the risk sits.

This guide does not give prices. Costs depend on the site, the design, the market and the timing, and a figure out of context is more likely to mislead than help. It shows you how to read what you are given, so you can compare quotes properly.

Quote, estimate or tender?

• An estimate is a rough guide and is usually not binding.
• A quote is an offer to do defined work for a defined price, on stated assumptions.
• A tender is a quote in a formal process, usually prepared against a common scope and set of documents.

Check which one you have. Phrases such as "approximately", "subject to site conditions" or "budget only" tell you the number is not firm.

What a good quote includes

1. Who and what. The contracting entity's name, licence number and ABN, and the site address. Verify them using checking a builder's licence in NSW.
2. Scope of work. A description specific enough that you could check it was done: rooms, areas, methods, standards.
3. Drawings and specifications. What the price is based on, with revision numbers.
4. Inclusions and exclusions. Stated, in writing.
5. Allowances. Prime cost items and provisional sums, with amounts.
6. Programme. Start, duration and key dates.
7. Payment terms. Deposit and progress payments.
8. Insurance. HBCF where it applies, and other insurance, as covered in builder insurance in NSW.
9. Variations. How changes are instructed, priced and approved.
10. Records and warranties. What you receive at handover.

The terms that move the price

Prime cost (PC) items and provisional sums

These are placeholders for items not yet selected or work not yet measured.

• A prime cost item is an allowance for something you will choose, such as tiles, tapware or appliances. If you choose something more expensive, the difference is added.
• A provisional sum is an allowance for work that cannot be fully described or priced yet, such as rock excavation, or repairs that will only be known once walls are opened.

Both are legitimate. The risk is in the amount. A quote with low allowances looks cheap but will increase. Ask what the allowance would buy, compare it to what you actually want, and ask for allowances to be realistic. Our article on fixed-price and cost-plus contracts explains how different contract types share these risks.

Exclusions

Common items to see excluded: council or certifier fees, engineering, survey, scaffolding, waste removal, landscaping, painting, window coverings, removal of hazardous materials, temporary accommodation, and making good to existing finishes. Excluded does not mean cheap, it means somebody still has to pay for it.

Assumptions

"Assumes standard site conditions", "assumes no asbestos", "assumes existing structure is sound". Assumptions that turn out to be false create variations. In older buildings and renovations, they often do, and our article on renovation hidden defects explains how a sound contract deals with that.

Variations

A variation is a change to the agreed work. They are normal. What matters is the process: a written instruction, an agreed price and time effect, before the work is done. Ask to see the clause.

Margins and preliminaries

Preliminaries cover the costs of running the job, such as supervision, site set-up, insurance, safety and access equipment. Margin covers overheads and profit. A very low quote may have cut one of them, and that comes back as cut corners or variations. A transparent quote makes these visible.

Payment terms

For residential building work in NSW, the NSW Government says:

• a written contract is required if the price is over $5,000 including GST;
• the maximum deposit is 10% of the contract price;
• for contracts over $20,000, HBCF insurance must be in place before the builder can ask for a deposit or other payment; and
• contracts over $20,000 must include a progress payment schedule, and payments must match the work actually done.

Be cautious about a payment schedule that front-loads money. Ask for payments tied to completed and inspected stages. This works well with the hold points described in our approach.

Comparing two quotes

Put them next to each other and answer these questions:

Use the answers to adjust each price to a common basis. A quote that is 15% lower but excludes scaffolding, testing and the records may be the more expensive one.

Questions to ask the builder

• What is not in this price?
• Which allowances are you least certain about?
• What would make the final cost go up, and what would make it go down?
• What checks do you do before concealed work is covered?
• Who will supervise on site?

Our list of twelve questions to ask a builder goes further.

Working with us

We explain what is included and excluded in plain language, and we welcome questions. If you would like us to price a project, get in touch. Our How We Build page describes what sits behind our price.

Sources

• Contracts for residential building work, NSW Government

This article is general information, not legal or financial advice. Contract requirements depend on the work and its value, so check the current rules with NSW Fair Trading and get legal advice before signing. Full website disclaimer