The definitions
PEM (presupuesto de ejecución material, direct works budget). The sum of all the project's work items at their unit prices: materials, labour, machinery and auxiliary means, with site indirect costs already distributed inside the prices. It is the cost of executing the works, without the contractor's corporate structure or its profit.
PEC (presupuesto de ejecución por contrata, contract budget). The PEM increased by the company's overheads and industrial profit. The dominant convention, inherited from public procurement, applies 13 % overheads and 6 % industrial profit on the PEM; the private market uses it as a reference with freedom of agreement.
The arithmetic
| Item | Calculation | On a PEM of €1,000,000 |
|---|---|---|
| PEM | Sum of work items | €1,000,000 |
| Overheads (13 %) | 0.13 × PEM | €130,000 |
| Industrial profit (6 %) | 0.06 × PEM | €60,000 |
| PEC | 1.19 × PEM | €1,190,000 |
| PEC with VAT (10 % housing) | 1.10 × PEC | €1,309,000 |
| PEC with VAT (21 % general) | 1.21 × PEC | €1,439,900 |
Two usage clarifications. The 13+6 percentages are convention, not a law of nature: private contracts can agree other values, and the only firm rule is to declare them. And the PEC is not the project's total cost: professional fees, permits and the ICIO tax, utility connections, insurance and land remain outside; the complete chain up to development cost is developed in from PEM to total cost, in the cost guide.
The document map: where each level lives
| Document or use | Level employed |
|---|---|
| Execution design (quantities and budget document) | PEM |
| Building permit and ICIO tax calculation | PEM in general municipal practice |
| Professional fees referenced to the budget | Usually PEM |
| Tender and works contract | PEC (plus VAT) |
| Progress certificates and valued statement | Contract prices, consistent with the contracted level |
| Ten-year warranty and technical inspection | Referenced to the declared budget per the policy |
The operating rule that avoids all errors: every circulating figure carries its level label. A budget that says "€1,190,000" and nothing else is a source of conflict; one that says "PEC, VAT excluded, overheads 13 % and profit 6 % on a PEM of €1,000,000" is data.
The three classic errors
Comparing a PEM with a PEC. It happens when comparing the design budget with a contractor's offer: the 19 % difference is not an increase, it is a change of level.
Applying ratios at the wrong level. Published ratios per m² exist at both levels depending on the source; applying a PEC ratio on a PEM base inflates the framing by 19 % without anyone getting a number wrong.
Forgetting the level in derived percentages. Fees, ICIO and charges are agreed or calculated "on the budget": without specifying which, the same contract admits two readings separated by 19 %.
The essentials
PEM is the cost of executing; PEC is the PEM plus the company's structure and profit (13+6 convention, factor 1.19). The design, the permit and the fees usually live in PEM; the contract and the certificates in PEC plus VAT. The discipline that resolves everything: no figure without its level label, and no derived percentage without its declared base.
Note: usual conventions in Spain in 2026; each contract's agreement and the applicable municipal ordinances prevail.