Price and manage delivery risks — Architecture & engineering

By the end of this lesson, you will be able to calculate a price, test its return and address a delivery risk.

Common to all countries

Build the cost before choosing the price

Start with quantities, paid time, third-party costs and delivery assumptions. Include mobilisation, supervision, compliance, warranty or support, overhead and the end of the contract where relevant. Separate fixed costs from costs that vary with usage. Forecast volumes are not minimum orders unless the contract makes that commitment.

In this exercise, target margin means profit divided by selling price. A 20% margin therefore requires price = cost ÷ 0.80. Adding 20% to cost is a markup and produces a lower margin. Taxes, discounting and financing are excluded from these teaching sums; add the applicable items to a real bid. Test one credible adverse scenario and decide who controls its cause and how the contract allocates it.

Worked example — Design a neighbourhood learning centre

This is a fictional teaching case. Quantities, prices and contractual conditions below are assumptions for the exercise, not legal requirements or market benchmarks.

Two extra design rounds consume specialist time. Define the included review cycles, how consolidated comments arrive and the contractual route for additional scope. Do not assume every client comment is a payable change.

Item	Cost (currency units)
Design team	30,000
Specialist studies	12,000
Coordination and overhead	6,000
Total	48,000

Total cost is 48,000. To retain 20% of the selling price as profit, price is 48,000 ÷ 0.80 = 60,000. If “Two additional review cycles” adds 4,800 to cost without a price increase, profit becomes 7,200, or 12% of price. Preserving 20% would require 66,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase.

Country specific — what to verify

Verify protected professional titles, registration and recognition of foreign qualifications. Check competition anonymity before putting identifying marks in a design submission. Professional indemnity, design-stage terminology, planning approval and intellectual-property provisions require local and contract-specific review.

Professional indemnity and permitted fee arrangements. Use the destination-country module and the actual tender pack. The sources below are references with their own scope; they do not form a single worldwide regime. For the general method, revisit the foundations.

Put it into practice

Calculate the price for 20% of selling price as profit, then add 4,800 to cost. Calculate profit at the unchanged price and write one risk-control action.

Model answer

Total cost is 48,000. To retain 20% of the selling price as profit, price is 48,000 ÷ 0.80 = 60,000. If “Two additional review cycles” adds 4,800 to cost without a price increase, profit becomes 7,200, or 12% of price. Preserving 20% would require 66,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase. Two extra design rounds consume specialist time. Define the included review cycles, how consolidated comments arrive and the contractual route for additional scope. Do not assume every client comment is a payable change.

Keep this worksheet in your working file. The quiz below checks the lesson’s decisions; passing it is neither a professional qualification nor a guarantee of an award.