Front-loaded costs
The term ‘front-loaded’ refers to costs that are applied disproportionately to elements of the work that take place early on during a project or part of a project.
Suppliers may front-load costs (or prices in bids) in order to maximise their revenue early in a project by assigning overstated values to the preliminary elements of the work. For example, a contractor might front-load costs for preliminary construction work such as services diversions, demolition, setting out, groundworks, piling, and so on.
Front-loading costs can help reduce a supplier's risk on a project, by improving their cash flow and ensuring that maximum payments are received on projects that might not proceed to completion. However, making payments in excess of the value of work completed puts the client under greater financial pressure early in the project and also at greater risk if the project does not proceed, or if a supplier becomes insolvent or has to be replaced. It can also act as a disincentive for suppliers to keep to time schedules, as they may have already completed the most profitable parts of the works.
Front loading can be avoided by detailed cost planning and cash flow projection during the design development and tender stages of a project, giving the client a clear idea of how much they should be expected to pay at different stages. Tender assessment should then allow comparisons to be made between competing bids to determine whether individual tenderers have submitted excessive prices for certain aspects or stages of the works. During the construction phase, there should be careful assessment of applications for payment to ensure that the amounts paid do not exceed the value of the works completed.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Specifying rendered external wall insulation for fire safety
How to interrogate the evidence provided to the specifier.
The benefits of writing articles for your organisation
How to create a profile for your organisation and publish for free.
No Falls Week. The importance of safe working at height
What to expect and what is on offer to avoid accidents.
Scottish Government action to reach net-zero targets
Retrofit expert group highlight critical actions needed.
A forward thinking, inclusive global community of members.
From engineered product life-spans, to their extension.
Circular economy in the built environment
A brief description from 2021. Where are we now?
Mental Health Awareness Week with ABS
Architects Benevolent Society programme of activity.
CLC publishes domestic retrofit competency framework
Roadmap of Skills for net zero.
May 13-19: Moving more for our mental health.
Understanding is key to conservation.
Open industry engagement survey seeks responses
Institutions and the importance of engagement.
National Retrofit Hub unveils new guide
Digital Building Logbooks and Retrofit: An Introduction.
Enhancing construction site reporting efficiency
Through digitisation and the digital revolution.