Construction item pricing: For more profit and less risk
Date of this Version
The pricing of the constituent component items of a project has a substantial influence on the profitability of a project for a contractor. Despite this, there has been relatively little research done on this subject since ‘unbalanced bidding’ (the manipulation of component item prices) was identified as a viable strategy 50 years ago.
The science now confirms that there are considerable benefits for contractors of large-scale projects if they adopt a well-disciplined and well-informed approach to the pricing of their work – whether this is building construction, road or bridge-building, or aircraft or ship manufacture. This book outlines a new approach, called CUP Theory (Construction Unit Pricing Theory), which is intended to lay a new foundation for a scientifically based approach to item pricing. It shows that contractors could increase their profit by as much as 150% without much change to their risk. The author has included a CD containing the program by which pricing can be calculated, and has presented it so that it can be further worked on by those researching the field.
This book is intended to help establish a new foundation by which research into this field can be more openly discussed and debated, recognising that item pricing per se need not be unethical or exploitative, and that the industry – as a whole – has much to benefit from a more professional, more quantitatively sophisticated, and more openly discussed approach to this important subject.
This document has been peer reviewed.