The Hidden Variation
HOW you work is as important as your SCOPE of work
A client of ours was contracted to demolish a section of building. In supplying the quote they based the price on a single day use of a 300 tonne crane plus a day of traffic control. However none of that was in the contract. When it came time to do the work, the local council would not allow a crane that size in the area. At the end of the day the contractor had to use a 30 tonne crane over 8 days with 8 days of traffic control. The important thing here is that the actual scope did not change: only the methodology. So while there is no variation in the scope of work, there is in how it was done.
Let’s look at another example. Two companies bid for a demolition contract to take down an old townhouse. One company came in at half the other, and so were hired immediately. To the owners amazement this company turned up with 15 men who took the building down one brick at a time, cleaned the bricks on site, and re-sold them! The job took 6 weeks. Now the actual scope of work was the same; demolish a townhouse. But the method was completely unexpected. The owner was forced to wait and instead of a 4 day job, it was a 6 week job.
So work methodology is very important, because it can turn profitable work into a loss if you are forced to do work in a method that you had not budgeted for. So it is a good idea to insert in your quotes the ‘Assumed Method of Work’ into your quotes. This will mean that if you ultimately have to work in a different way then you can claim the cost difference even though the actual scope has not changed. How should you go about deciding what to include in this part of your quote?
Consider all the elements that you are pricing:
This will include
Labour – how much will you need to do the work using the selected method
Materials – what brands have you chosen?
Plant & Tools – will you need to hire any of these?
Access Method – Will access to the work incur a cost? Is it straight forward or at heights?
Working Hours – are there enough each day for your method?
Cranage – will you get enough access to the crane?
Standard versus Customised work – have you allowed for any customised fabrication versus ‘off the shelf’
Critical path – does your work depend on other trades doing their bit first?
Once you have considered this, then you need to decide if any of these will incur a cost.
Ask yourself “Have I made any assumptions about how I will do this job?”
If the answer is ‘NO’, then you need not include anything because there are then no variables that can change to affect your profit. If the answer is ‘Yes’ then ask yourself “What are the possible alternatives I may have to allow for, for each of the elements I have priced”? For example, if you have assumed that you use Brand X lights and will install them off a scaffold, but may have to install Brand Y from a ladder, this will add to your cost. Carry out this exercise for each element.
Now ask yourself
“Will a switch to either alternative lose me money?”
If the answer is ‘Yes’, then specify your budgeted methodology in your quote.
So for example, you may specify that you will install Brand X lights off the builders scaffold. If the builder wants another Brand it will be additional cost. If you are forced to supply an EWP to install the lights that is also additional cost because you specified your method in your quote and your price allows only for your quoted method.
Imagine if you quoted to simply ‘install lights’
You may have assumed the brand and access method, but because it is not in your quote then any changes will be worn by you because the scope has not changed.
So take the time to describe exactly what method your price allows for and then you will have the ability to claim for that ‘hidden’ variation: the method of work you have budgeted for.
It is a crucial way top preserve profit.