An Explanation of Building Costs

One of the most frequently asked questions by people considering extending their home is “how much will it cost?” This is of course a perfectly sensible question to ask and indeed anyone not agreeing prices at the start of a project is invariably letting themselves in for a lot of grief later on. It must be remembered, however, that ‘buying’ building works is not the same as buying a fridge or a suite of furniture – you can’t simply walk into a showroom, point to one you like and have it delivered. Every building project is a one-off, specifically designed and built to suit the individual client’s needs, to tie in with the existing house and to fit onto the site available. This is why designers can’t simply quote you a price for design services over the ‘phone without knowing a lot more detail, nor a builder quote you for construction without detailed plans and specifications.

Equally, the actual building process itself will differ from builder to builder leading to a wide range of prices received from potential contractors. Of course in some cases a high quotation for building costs may simply be down to overcharging but more frequently the different quotations received are a result of the different circumstances encountered by each contractor.

To illustrate the point, let us image a very simple item of building work, pouring the foundations for a small porch:

 

The first builder quoting for the job may estimate that it would take 2 men 4 hours to dig the foundations and pour the concrete. But because his labourers have to be transported to the job in the morning and collected at the end of the day he has to charge them both out for 8hours at £15 per hour. He then orders his concrete at a cost of £60 per m3 but as he only needs 2m3 he is charged an extra £8 for each m3 of empty space in the delivery lorry. His cost for the job can therefore be calculated as:

Man 1 – 8hrs @ £15/hr £120
Man 2 – 8hrs @ £15/hr £120
2m3 concrete @ £60/m3 £120
4m3 unused lorry space @ £8m3 £ 32
Total cost to builder £392
Add overheads & profit @ 15% £ 59
Builder’s quoted cost of work £451

 

A second builder reckons his two labourers can also complete the job in 4 hours but because one of them has a van and they are working on another job in the same area their labour costs him only £120. His concrete also costs £60 per m3 but because his supplier is delivering to the other local site they agree to deliver the 2m3 for the foundations without charging extra for empty lorry space. This makes this builder’s costs:

Man 1 – 4hrs @ £15/hr £ 60
Man 2 – 4hrs @ £15/hr £ 60
2m3 concrete @ £60/m3 £120
4m3 unused lorry space @ no charge £ 0
Total cost to builder £240
Add overheads & profit @ 15% £ 36
Builder’s quoted cost of work £276

 

A third builder has already lined up a job in the same street where he will have a digger on site for a week. He knows that the can dig and pour the foundations in 2 hours with this so even though he has to charge it out at £30 per hour this amounts to only £60. He sources his concrete from a different supplier who delivers in smaller lorries but charges £70 per m3. The builder’s quotation will then be:

Digger & driver 2hrs @ £30/hr £ 60
2m3 concrete @ £70/m3 £140
Unused lorry space @ no charge £ 0
Total cost to builder £200
Add overheads & profit @ 15% £ 30
Builder’s quoted cost of work £230

 

As can easily be seen, the prices quoted are quite wide-ranging and yet all three builders’ percentage profit is the same. And even though the first builder’s quotation is almost twice that of builder 3 his price is easily justified.

Now imagine that builder 3 has prior knowledge of the area and knew that he would have to dig down 1½m to hit good ground. In pricing for this extra digging and soil disposal his quotations rises to £430. He is unlikely to get the job at this price. The permutations are almost endless.

This is only one small work item we have considered – just imagine how far apart quotations can be for entire projects, especially if the builders are pricing to a verbal description rather than a fully specified set of drawings.

The conclusion is that even if a builder gives you a quotation that seems high there is often a perfectly logical and honest explanation.

So how much will your buildings works cost? You simply won’t know until you receive your quotes and even then it is wise to allow at least an additional 10% as a contingency sum to cover any unexpected extras.

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