Sakhile Construction Business Plan — Estimating and Contract Control

How work is priced, how variations and claims are managed, and the contract controls that protect margin once on site.

Estimating and Contract Control

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11.1 The estimating discipline
11.2 Where estimates go wrong
11.3 Contract control after award

One percentage point of gross margin is R520 000 at Year 5 turnover. Estimating is therefore not an administrative function that supports the business; it is the function that determines whether the business has a margin at all.

11.1 The estimating discipline

Discipline	Practice	Why
Priced bill of quantities	Every element measured and priced, never a rate-per-square-metre allowance	A square-metre rate is an assumption dressed as a price
Current material prices	Quotations refreshed at bid, not carried from the last contract	Merchant prices move and the contractor carries the movement
Labour constants	Measured from the company’s own completed contracts, not from a published table	The company’s productivity is the only relevant productivity
Subcontractor quotations	Written, scoped and valid for the tender period	An unscoped subcontract quotation is a variation waiting to happen
Preliminaries	Priced explicitly, including the financing cost of the expected payment period	Section 6.1; the delay is a cost and belongs in the price
Contingency	Explicit and separately identified, not buried in the rates	A hidden contingency gets competed away
Risk register per bid	Contract terms read and priced; risk transferred is a cost	Clients are transferring more risk with less compensation

11.2 Where estimates go wrong

Failure	Typical cost	Control
Rate-per-square-metre pricing instead of a measured bill	Two to five points of margin	Every element measured and priced from the drawings
Material quotations carried from the previous contract	One to three points on a rising market	Quotations refreshed at bid and valid for the tender period
Published labour constants instead of measured ones	Two to four points where productivity differs	Constants measured from the company’s own completed contracts
Unscoped subcontractor quotations	The gap becomes a variation the contractor funds	Written, scoped quotations valid for the tender period
Preliminaries under-priced or omitted	Site establishment, supervision and financing unrecovered	Priced explicitly, including the financing cost of the payment period
Contingency buried in the rates	Competed away at adjudication	Explicit and separately identified
Contract terms accepted rather than priced	Transferred risk carried without compensation	A risk register per bid; a risk transferred is a cost

Any two of these together account for the three-percentage-point margin miss modelled in Section 16, and none of them is exotic. They are the ordinary failures of an estimating function that has not been professionalised, which is why appointing an estimator at Year 2 and a quantity surveyor at Year 4 are both gate conditions rather than discretionary hires.

11.3 Contract control after award

A cost report per contract, monthly, comparing committed and incurred cost against the priced bill, with the forecast final account updated every month rather than at completion.
Every variation instructed in writing before it is executed, priced from the contract rates where they apply and agreed before the work is done.
Measurements agreed with the client’s agent in advance of the certificate rather than argued afterwards, which is the single largest cause of certification delay.
A final account prepared and agreed within 60 days of practical completion, because the retention release clock and the defects liability period both run from it.
Every completed contract reviewed against its estimate, with the variance fed back into the labour constants for the next bid.

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