Below is a list of the most common ‘Pricing Strategies’ that Quantity Surveyors and Cost Managers come across in their Real Estate and Construction projects:
1. Stipulated Sum (Lumpsum)
2. Guaranteed Maximum Price (GMP)
3. Cost Plus a Fee
4. Time and Materials (T&M)
5. Re-measurable / Unit Price
Recommending one Pricing Strategy over another is a KEY decision which can make or break your project. Therefore, you need to consider the following carefully before advising your clients:👇
1. Level of design for drawings and specifications
2. Completeness of scope of work
3. Nature, size, scale and complexity of the project
4. Schedule importance, and any requirements for fast tracking
5. Risk appetite of owner
Selecting the wrong Pricing Strategy is an expensive error which will lead to Change Orders, cost overruns, schedule delays, claims and ultimately disputes between the project parties.
Therefore, it is very important to invest your time and effort in “Front End Planning” during the Preconstruction Phase.