Price certainty in the construction industry
Price is the amount paid for acquiring a product or a service. It is not the same as cost, which is the amount incurred in making something or providing a service. Price is therefore understood from the buyer’s perspective while cost is understood from the producer/supplier's perspective.
Price certainty can describe a state of affairs whereby before a project or part of a project starts, a contractor is be able to buy materials and components at a fixed, pre-agreed price which is both competitive (possibly below the market average) and advantageous. Certainty is provided by the supplier that the goods will be supplied at the agreed price and at the right time, possibly over a regular period. The basis of price certainty is forward planning and pre-agreement.
For example, a contractor or subcontractor may be able to order a pre-agreed volume of fuel every month at a fixed price for a specified future period. This provides a greater assurance of supply and helps budgeting as it removes the uncertainty of fluctuating fuel costs.
On the supply side, price certainty may contribute to cost certainty in that as a result of the pre-agreement, the supplier receives a fair price for the product or service which covers their production and/or supply costs and leaves them with a profit.
In the absence of agreement, their may be uncertainty about price.
[edit] Related articles on Designing Buildings Wiki
- Budget.
- Capital costs.
- Construction costs.
- Construction price and cost indices.
- Cost control.
- Cost information.
- Cost of building.
- Cost overruns.
- Cost plans.
- Cost vs price.
- Front-loaded costs.
- Estimate.
- Hard costs v soft costs.
- Irrelevant cost.
- Operational costs.
- Other development/project costs.
- Relevant cost.
- Whole life cost.
Featured articles and news
Download your free guide.
Four new types of prior approval for solar developments
Online Planning Portal application types from 5 September.
Election fails to spark construction industry revival
Contract awards and planning; post election.
Making diversity and inclusion easy for SMEs
The CIOB tool for companies with limited resources.
Sustainable Futures: Redefining Retrofit for Net Zero Living
BSRIA Briefing 2024, initial speakers announced.
Looking back at the UK's first Passivhaus leisure centre
Reflections on St Sidwell’s Point with CIAT.
A-Level results and electrical apprenticeships
Electrical Skills Index highlights areas with skills shortages.
One of the world's more unusual drive-throughs.
A quick introduction.
Hadrian's Wall Path and the national trails
The trails are heritage assets in their own right.
Articles on timely advice and hydraulic lime.
Building Designers Association of Australia
CIAT and BDAA sign Memorandum of Understanding.
Built Environment Inclusive partners issue statement committed to inclusion.
Building regulation requirements can have unintended consequences.
CIOB announces 2024/25 vice president
Sustainability champion Professor Saul Humphrey.
Accelerating towards a net-zero built environment.