Quotation or Estimation

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Quotation or Estimation

What is the difference between a Quote or Estimate?

It amazes me how this is still a huge unknown aspect in the building industry today.

My name is Hamid Zwart and I am the owner and director of Yourbuilder. I’ve been renovating homes over the last 25 years both in the Netherlands and New Zealand.

Renovators simply aren’t aware of the difference between a quotation or an estimate before committing to a building company. Often the type of contract offered to the customer, is simply because it suits the building company and no intent of finding out what is the best option for you, the customer.

So why is it so important that you understand the difference before choosing your contract type? The different contracts have different benefits and disadvantages which suit different people. One is not better than the other, just suits different situations, budgets and stress levels. The fact the builder can offer you a Quotation or an Estimate and can clearly explain and help you through that decision can be a sign that he is interested in providing you a service not just a limited solution and that’s got to be recognised as a good thing.

So let’s give you a bit of an insight from a builder’s point of view what are the main differences between the two.

  1. Budget – If you have a limited budget, it’s going to be stressful if the project runs over budget. One of the most misleading assumptions, Is that an estimate can/should only run over 10-15% on the original scope of works. This is simply not true. If a builder specified to excavate two pile holes 400x400x400mm and he allowed 2 hours to do this the approx cost would be (2 builder hours x 60,-=120,-) However, the soil is too soft and the load bearing is not sufficient so the builder will need to hire a digger and a driver, drill down let’s say 1500mm which will take now (8 builder hours x 60,- =480,- plus the digger and driver for the day 635,- total 1135,-) That’s a 945% increase on your original estimated price!. In saying that, if you were to chose a quotation and that same situation was to occur, a quotation wouldn’t save you from those additional costs either. Why? because the pile hole was specified and because it was necessary to excavate further, additional costs will be payable. However, if the hole size remains the same and through rock hard soil it ends up taking 4 hours to excavate, under a quotation (CBANZ Fixed price) these additional hours will need to be absorbed by the builder.
  2. Quotation – An experience builder will know after some years what percentage of contingency he needs to include within his quote to cover the worst case unknowns and time discrepancies. However this buffer throughout the entire project is often not utilised. Choosing a quotation will limit price increase compared to an estimation. However you will pay a premium for this luxury, possibly an over inflated priced and you will still have to pay for any variation work.

Propping and excavation

Inexperienced builders are at risk the most of delivering low quality workmanship especially when they haven’t sufficiently priced the job. All of a sudden poor communication, tradesman not turning up and cutting corners becomes the norm.

Tip: For building work amounting to 40k or more, it is now compulsory that builders are required to present with a formal building contract.

If you would like to download a copy of the latest Certified Builder in Auckland Cost & Margin or Fix price contract, please visit our website www.yourbuilder.co.nz
Or you need help deciding which contract is best for you? Contact me on 021541392

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