One of our builders recently had a client come to him asking for early builder involvement and a value management solution.
Why?
Because the client had already been through the traditional tender process with an architect.
Three builders. One set of plans. Three separate quotes.
The lowest quote came in at approximately $3.2 million. The highest came in at approximately $4 million. The third landed somewhere in between.
That is an $800,000 swing between builders pricing the exact same project from the exact same drawings.
The client was happy to share the quotes, so the builder took them to one of the best estimators in the country for an independent review.
The estimator looked at the numbers and said something that should stop every builder in their tracks.
That variance was actually quite good.
Read that again.
An $800,000 difference between the lowest and highest quote was considered a reasonably narrow variance.
And builders are worried that properly pricing supervision, project management and margin is going to make the client’s project unaffordable.
It is not.
Your Margin Is Not the Problem
I see this constantly.
Builders know they should be charging more. They know supervision is not being recovered properly. They know project management is either missing, underpriced or buried inside the job. They know their margin needs to be closer to 25 per cent, which is approximately a 33 per cent markup.
But they are terrified.
They think: What happens if I charge $140 an hour for supervision? What happens if I charge $200 or $300 an hour for project management? What happens if I put the correct margin on the job? Will the client walk away?
Maybe.
But if accurate costing and a proper margin make the project unaffordable, the builder has not caused the affordability problem. The client simply does not have the budget for the project they want.
That is the truth.
An $800,000 Swing From the Same Plans
Let us put this into perspective.
Three builders priced the same drawings. The spread was approximately $800,000.
There is no realistic amount of supervision or project management you could add to the job that would explain that entire difference.
The pricing swing already exists before you start talking about whether your supervision rate should be $100, $140 or $200 an hour.
It exists because builders interpret drawings differently. They make different assumptions. They allow for different levels of risk. They use different suppliers and subcontractors. They identify different gaps in the documentation. They carry different overhead structures. And some understand their numbers far better than others.
The idea that your correctly priced supervision or margin is what suddenly destroys affordability is simply wrong.
The project was either affordable or it was not.
Accurate Costing Is Part of Your Duty of Care
Underpricing a job is not helping the client. It is not generous. It is not noble. And it is not good service.
If you leave out supervision, underestimate project management or reduce your margin because you are desperate to win the work, someone will pay for that decision later.
It may be the builder through lost profit, stress and cash flow pressure. It may be the team through unrealistic workloads and rushed delivery. It may be the client through delays, disputes, variations, shortcuts or a builder who cannot financially complete the job properly.
Accurate costing is part of your duty of care.
The client deserves to know what the project genuinely costs before construction begins. Not the number required to win the tender. Not the number the builder hopes they can somehow make work. The real number.
That includes proper supervision. Proper project management. Proper risk allowances. Proper overhead recovery. And a proper margin.
If the real number does not fit the client’s budget, the answer is not for the builder to sacrifice their profit. The answer is value management.
Slow the Front End Down
This is exactly why early builder involvement and budget-led design matter.
Instead of allowing an architect to complete a design and then sending it to three builders to discover what it costs, bring the builder in early.
Establish the budget. Test the design against it. Identify the expensive decisions before they are locked in. Work with the architect, client and consultants to improve buildability, control risk and protect the design intent.
That gives the client options. Reduce the scope. Change the specification. Simplify the structure. Stage the works. Increase the budget. Or decide not to proceed.
Those are honest decisions.
What is not honest is asking the builder to absorb the affordability gap through weak costing and inadequate margin.
Stop Owning the Client’s Budget Problem
Builders need to stop carrying anxiety that does not belong to them.
You are responsible for producing an accurate price. You are responsible for understanding your costs. You are responsible for including supervision and project management. You are responsible for protecting your margin. You are responsible for delivering the project properly.
You are not responsible for making a $4 million design fit a $3 million budget by destroying your own business.
That is not a pricing problem. It is a design and affordability problem.
And if the client cannot afford the real cost of the project, they are not the right client for that project in its current form. That does not make them a bad person. It just means the numbers do not work.
The Bottom Line
The traditional tender process produced an $800,000 swing between three builders working from the same plans. One of the country’s best estimators considered that variance reasonably good.
So stop believing that adding the supervision, project management and margin you should have charged all along is what makes the project unaffordable.
It does not.
Your accurate price protects the client. Your margin protects the project. Your profit allows you to employ good people, manage risk and complete the job properly.
If the client cannot afford the project at its real cost, that is the client’s affordability problem. It is not the builder’s profit problem.
Price it properly. Get involved early. Use value management. And stop apologising for running a healthy building business.
If your margins are not where they should be and you want to fix it, book a free strategy session. Let’s work out where the gaps are.
Kurt Hegetschweiler is the founder of Builders Coach and author of the internationally best-selling Million Dollar Builder. He has coached thousands of residential builders since 2004.
