Price and manage delivery risks — Energy, water & environment

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 — Improve municipal waste collection data

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

A treatment facility becomes unavailable. Verify the legality, capacity, distance and cost of a replacement before naming it as a backup. A cheaper alternative is not acceptable merely because the reporting software can select it.

Item	Cost (currency units)
Collection operations	32,000
Treatment	16,000
Measurement and reporting	8,000
Total	56,000

Total cost is 56,000. To retain 20% of the selling price as profit, price is 56,000 ÷ 0.80 = 70,000. If “Alternative authorised treatment route” adds 5,600 to cost without a price increase, profit becomes 8,400, or 12% of price. Preserving 20% would require 77,000, 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

Determine the waste classification, permits, traceability documents and destination rules applicable to the actual flow. Water, energy and waste activities have different regulatory boundaries. Verify the buyer’s procurement regime separately from operating authorisations and environmental evidence.

Tariffs, permits, liability and concession provisions. 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 5,600 to cost. Calculate profit at the unchanged price and write one risk-control action.

Model answer

Total cost is 56,000. To retain 20% of the selling price as profit, price is 56,000 ÷ 0.80 = 70,000. If “Alternative authorised treatment route” adds 5,600 to cost without a price increase, profit becomes 8,400, or 12% of price. Preserving 20% would require 77,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase. A treatment facility becomes unavailable. Verify the legality, capacity, distance and cost of a replacement before naming it as a backup. A cheaper alternative is not acceptable merely because the reporting software can select it.

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.