1. The two documents and how they differ
The description in professional sources is clear and sequential. The budget is prepared before the tender.
| Step | Content |
|---|---|
| 1 | The company prepares a construction budget, calculating the actual costs of the works as precisely as possible |
| 2 | Overheads and profit are added to the budget |
| 3 | The resulting total is the total of the tender submitted to the client |
| 4 | The tender is usually somewhat less detailed than the budget |
The detail therefore exists: it simply does not reach the client in the same form, and the rest of the guide deals with that gap. The form changes at the moment of submission.
2. How a construction company actually calculates
According to professional sources, budgeting consists of three components, to which a fourth is often added. They are quantities, unit prices and margin.
| Component | Content |
|---|---|
| Quantity calculations | working through the design and drawings, calculating the quantities of work |
| Knowledge of technology and materials | how much material is consumed per unit |
| Price enquiries to subcontractors | gathering input prices |
| Subcontracting itself | works the company buys in |
Professional sources cite as an example how many screws per square metre must be allowed for when fixing plasterboard. This is a resource-based calculation, not the multiplication of a price per square metre, and it is done afresh for every tender.
3. Why the tender is less detailed
Three reasons, the third of which is stated frankly and deserves acknowledgement rather than criticism. It concerns competition.
| Reason | Explanation |
|---|---|
| The client often wants a different form | the tender is rewritten to suit it |
| A detailed tender reveals the cost structure | that is the company's competitive advantage |
| Showing costs line by line is often the hardest point for a company | the wording of professional sources |
A company has a legitimate interest in not disclosing how much it earns on any item. The question is therefore not whether a company should disclose everything, but what level of detail makes tenders comparable without revealing the cost structure.
4. What this means for the client
Three consequences, and the third is the technical core of this guide. It concerns comparability.
The tender received does not show how the price was formed, and comparing two tenders therefore compares summaries rather than calculations. A difference between tenders may arise either from content or from the distribution of margin, as covered by the article on comparing lines.
The third is not usually explained to clients, so they read a price difference as a difference in content even when it is a difference in pricing. An explanation would correct the reading.
5. What follows from it
One conclusion directs the whole guide, and it is deliberately framed in the builders' favour. The remedy lies in the conditions of the procurement.
The problem is not that construction companies do not calculate precisely enough: they calculate very precisely, because otherwise they would lose money. The problem is that the calculation stays inside the company, and every tenderer redoes it in their own structure.
The solution is therefore not to ask companies to calculate better but to agree on a common structure in which the result is presented. The form is the client's to set.
Summary and four practical rules
A construction company first prepares a budget to calculate actual costs, adds overheads and profit, and submits a tender that is usually less detailed. Budgeting is resource-based, covering quantity calculations, knowledge of material consumption and price enquiries to subcontractors, rather than multiplying a price per square metre. The lower detail of the tender is partly legitimate, since a detailed tender reveals the cost structure, which is the company's competitive advantage.
Four rules: do not read a price difference between tenders automatically as a difference in content. Ask for structure, not costs, since the latter is the company's competitive advantage. Allow for the fact that the calculation has been made and only the form differs. Direct the requirement at a common structure rather than at greater precision.
This article offers professional orientation as at the date of verification. It replaces neither a quotation nor the assessment of a competent specialist.