Open-book pricing for construction projects

Why Evolution5 believes that open-book pricing benefits all involved with a project

There is a specific term within construction called Open Book Contracting. This article is not about that.

This article is about why Evolution5 believes that open-book pricing benefits all involved with a project.

Before we dive in – consider this. Trust – or the lack of it – is a serious yet common problem in the construction industry. We hear it repeatedly, whether talking to potential clients about their projects or even talking to fellow construction professionals.

Trust is hard to gain and easy to lose. 

How can you expect a project to run successfully and collaboratively when cloaked in secrecy and mistrust?

A project partner you can trust

When Jamie Barrett set up Evolution5, one of his key drivers was to do things better than he had seen them done throughout his career. You can hear Jamie talking about that in this video.

Trust, accountability and doing what’s right has always been at the core of Evolution5’s service to our clients. 

As our client, one of the fastest ways to build trust is to make it clear from the outset that nothing is hidden from you. That starts from the first conversation you’ll ever have with anyone in our business. 

Before you enter into a contract with us to deliver your project, you’ll go through a detailed consultation process to ensure that;

1. We can provide the skills and competencies you need for your project, and
2. Your project plan is realistic and achievable. 

Open book project costing

The first part of our consultation process is generally straightforward – and if we aren’t confident we can provide what you need for a successful project, we’ll let you know.

The second part can be more complicated. After all, it’s common for a potential client to approach us with either a project idea or with some architect’s drawings and a rough idea of a budget that they feel comfortable with but need a clearer understanding of whether the drawings are feasible within their budget.

For this reason, one of the first things we do is undertake a robust pricing exercise. 

You receive a line-by-line cost for delivering your construction project. Some assumptions may be made or provisional sums allowed if exact specifications aren’t known, but overall, you’ll get a pretty good idea of the build costs.  

And because we are clear about how much we are charging for our services and what our overheads and profit (OH&P) are, if the bottom line for your project budget is higher than you expected, it’s easy for us to talk you through other options.  

Let’s put that into context. Some contractors apply a ‘markup’ to line items, meaning the price in their budget isn’t the actual cost. It’s the cost PLUS their markup.

This means that if you need to look for ways to reduce overall costs or redistribute where money is spent within the entire project, a contractor can’t just swap the price of one product for a cheaper one. They need to ensure they’re getting their margin somewhere along the line.  

Example: 

• Contractor A: Floor finishes = £25,000 plus their markup of 15% = a line item of £28,750.
• Evolution5: Floor finishes 500m2 x £50.00 = £25,000

This example shows that if you choose a contractor who doesn’t offer open-book costing, the best you can expect is to know the overall cost of your floor finishes. If you are lucky, your contractor will install £25,000 of flooring – but of course, they may secure a lower price via a Main Contractor Discount (MCD) and retain any savings as additional profit. 

By contrast, our budget shows you the quantity of your floor finishes plus the price. This means you know exactly what you’re paying for and can price-check it yourself. This is particularly useful when we are the only company you’re dealing with for construction delivery. 

Suppose the cost of the floor finishes is more than you were anticipating. In that case, we can easily swap costs for alternative products without manipulating figures to protect our OH&P. Similarly, adjusting costs is straightforward if variations are needed at any point during the delivery of your project.

A point to note about main contractor discounts

Before we move on, let’s take a moment to address how Evolution5 handle Main Contractor Discount (MCD). After securing a contract, it is usual for a main contractor to approach suppliers for an MCD on materials. If a discount is negotiated, the contractor is not obligated to pass that saving to you as the end client. 

However, Evolution5’s open book approach means that you would enjoy the benefits of discounts when we are your appointed main contractor or if your project is delivered via construction management. 

Why do Evolution5 provide contracting services this way?

We firmly believe this is the right and fastest way to build trust with our customers. It enables us to communicate openly and honestly about your project’s granular details. 

Suppose you want to change products or material specifications. In that case, you can see the full impact it will have on your budget, and you can make data-driven decisions for the robust financial control of your project.

A note about our consultancy services and open book costing

While this article relates to our approach to contracting services, it’s worth noting that we offer the same transparency regarding our consultancy services. However, when we are your appointed consultant, construction costs are out of our hands after we issue the tender documents. 

Ready to work with contractors you can trust

If you’d like to learn more about our approach to open-book pricing for construction projects, call the team today on 023 8040 5073 or hit the button below to request a callback.