Understanding Bills of Quantities and Cost Estimates

Anyone who has asked a contractor “how much will it cost?” has met the problem that a building is not a product with a fixed price tag. Every plot, design and specification is different. Two builders may quote very different figures for what looks like the same house, and the owner often cannot tell why. Two documents help to solve this: the cost estimate and the bill of quantities. This article explains what they are and how to use them.

What is a cost estimate?

A cost estimate is a forecast of what a project will cost, prepared before the work is done. Early in a project, when only a sketch exists, an estimate is necessarily rough and is based on experience of similar buildings. As the design develops and more detail is known, the estimate can be refined. Its purpose is to help the owner decide whether a project is affordable and whether the design needs to be changed to fit the money available.

A good estimate covers more than construction. It should allow for professional fees, approvals, site preparation, external works, services connections and a contingency for the unexpected.

What is a bill of quantities?

A bill of quantities, often shortened to BOQ, is a document that lists the work in a building item by item, with the quantity of each item measured from the drawings. It is organised in sections, for example excavation and earthworks, concrete work, blockwork, roofing, carpentry and joinery, finishes, electrical installation and plumbing. Each item has a description, a unit (such as cubic metres, square metres, metres or number), a quantity and, once priced, a rate and an amount.

The key advantage is that every contractor who tenders prices exactly the same quantities. Instead of each builder deciding for themselves how much work is involved, they only supply rates. That lets you compare quotations fairly: if one total is lower, you can see which items make the difference.

How the quantities are prepared

A quantity surveyor works from the architectural and structural drawings and the specification. The process is called taking off: the surveyor measures lengths, areas and volumes, for example the length of foundation trenches, the volume of concrete in the footings and columns, the area of blockwork and the area of roof. These measurements are written in a standard format and are then abstracted and compiled into the bill. The quality of the bill depends on the quality of the drawings; if the drawings are incomplete, the bill will contain provisional sums and allowances rather than firm quantities.

How rates are built up

A rate is the price per unit of an item. A rate for blockwork, for example, combines the cost of blocks, cement and sand for mortar, the labour of the mason and labourers, the use of small tools, wastage and the contractor’s overheads and profit.

Using the bill to control a project

• Comparing tenders. Ask each builder to price the same bill and examine the differences. Be wary of rates that are far too low; they can mean the contractor has misunderstood the work or intends to cut corners.
• Valuing work for payment. As work progresses, the quantity surveyor measures what has been completed and values it using the bill rates. This gives a fair basis for stage payments.
• Pricing variations. If you add or omit work, the rates in the bill give a ready basis for calculating the change in price.
• Tracking the budget. The bill gives a clear view of where the money is going and where savings may be possible.

Provisional sums and contingencies

Some items cannot be fully defined before work starts, for example the exact depth of a foundation in difficult ground. A provisional sum is an amount set aside for such an item and adjusted later against actual cost. A contingency is a separate sum for unforeseen costs overall. Both are normal and sensible, but they should be clearly labelled so that nobody mistakes them for fixed prices.

Price changes

On longer projects, the cost of cement, steel and other materials can change. Contracts should say how this is dealt with: whether prices are fixed, or whether adjustments are made for price changes (often called fluctuations) according to an agreed method. Without a clear rule, disagreements are likely. A quantity surveyor can advise you on a method that suits the size and length of your project.

Practical advice for owners

• Make sure the drawings are complete before you ask for prices. Changes after tendering are the most common cause of cost increases.
• Do not treat an estimate as a guaranteed price, and do not treat a tender price as including items that are not in the bill.
• Ask your quantity surveyor to report on costs at regular intervals during the work.

Quantity surveying is one of the six services we offer; see our services page for more, or read our guide to planning a building project in Borno State. If you need a cost estimate or a bill of quantities for a project, please get in touch.