How large civil drainage packages are priced
Two tenders for the same drainage scope can arrive tens of percent apart, and the gap is rarely about margin. It is almost always about what each contractor assumed, and which risks they priced rather than hoped about.
This page sets out how a large drainage package is actually built up, from the perspective of the party doing the pricing.
The schedule of quantities is the spine
Most civil drainage is priced against a schedule of quantities: measured items, each with a rate, which together produce the tender sum. It is a good instrument because it makes tenders comparable and gives a mechanism for measuring what is actually built. We cover how to read one in reading a schedule of quantities.
The limitation is that a rate carries assumptions the schedule does not state. Two contractors pricing the same linear metre of pipe may be assuming entirely different ground, depth bands, bedding material and reinstatement standards.
What actually moves the number
Depth. The single biggest driver. Cost does not rise linearly with depth because shoring, dewatering, spoil volume and reinstatement all step up together. See stormwater pipe by depth band.
Ground. Rock, running sand and contaminated material each change method rather than just rate.
Groundwater. Dewatering changes the excavation, the bedding and often the working hours.
Live services. Working around them means non-destructive location, hand digging and slower progress.
Access and working room. A constrained urban site can double a programme against the same quantities in an open paddock.
Reinstatement standard. Reinstating a rural berm and reinstating a city footpath are different jobs at the same chainage.
Programme and sequencing. Staged possession, night work and restricted hours all carry cost.
Two tenders that look far apart are usually not disagreeing about profit. They are disagreeing about the ground.
Where risk gets priced, and where it gets hidden
Ground risk has to sit somewhere. Broadly there are three honest options and one dishonest one.
Priced in, where the contractor carries the risk and the rate reflects it
Provisional sum or dayworks, where the risk is identified and paid at actuals
Excluded and stated, where the tender says clearly what it does not cover
Excluded and unstated, where the tender is cheapest at award and recovered through variations
The fourth is the one that damages projects, and it is difficult to detect at tender precisely because it looks like the best price. The defence is to compare exclusions and qualifications as carefully as the rates, and to be suspicious of a tender with unusually few of either.
Why we would rather qualify than absorb
Where the geotechnical information is thin, a contractor has two choices: absorb the uncertainty into a rate, or state the assumption and price the known. Absorbing it produces a higher tender that may lose the job, or a lower one that becomes a claim later.
Stating the assumption is less comfortable at tender and considerably better for both parties afterwards. It also gives the client a real decision, because an identified risk can be investigated, and an investigated risk is usually cheaper than a priced one.
What makes a tender easy to evaluate
From the head contractor side, the useful tender does four things: prices the schedule as issued so it is comparable, states its assumptions on ground and depth explicitly, lists exclusions plainly rather than burying them, and gives a programme that matches the resources named in it.
A tender that does those four things can be trusted even where it is not the lowest, which is the point. Related reading on the underlying cost drivers is in what subdivision civil work costs.
Questions we get asked
Why are drainage tenders so variable?
Because rates carry unstated assumptions about ground, depth, groundwater and reinstatement. The variance is usually assumption rather than margin.
What is the biggest single cost driver?
Depth, because shoring, dewatering, spoil and reinstatement all step up together rather than rising smoothly.
Should ground risk be priced or carried as a provisional sum?
Either can be appropriate, provided it is stated. The damaging option is risk that is excluded without being disclosed and then recovered through variations.
How should tenders be compared?
Compare exclusions and qualifications with the same attention as the rates, and check that the programme matches the resources the tender names.
Does more geotechnical information reduce cost?
Often, yes. An investigated risk is usually cheaper than a priced one, because the contractor no longer has to carry uncertainty in the rate.
Draeinail Construction has delivered civil and drainage projects since 2006, from Puni in South Auckland and a permanent crew in the Queenstown Lakes district. To discuss a package or add us to a tender list, get in touch or call Darryn Muir on 021 271 0035.
