Last edited 27 Aug 2020

Schedule of rates for construction

[edit] Introduction

In its most simple form, a schedule of rates can be a list in a contract setting out the staff, labour and plant hire rates the contractor will use for pricing cost reimbursable instructed daywork.

However, on a much larger scale, a 'schedule of rates term contract', 'term contract' or 'measured term contract' may be used when the nature of work required is known but it cannot be quantified, or if continuity of programme cannot be determined. In the absence of an estimate, tenderers quote unit rates against a document that is intended to cover all likely activities that might form part of the works.

As the extent of the work is unknown, the unit rates include overheads and profit. General preliminaries such as scaffolding, temporary power, supervision and temporary accommodation will also have rates. On projects longer than around 18 months there might be escalation provisions based on annual percentage increases.

Variations are easier to estimate and normally cheaper than on fixed price traditional contracts.
The client can stop and start work at a pace that might be determined by cash flow or funding.
A larger pool of contractors can be asked to tender as the process is inexpensive and quick.
It is flexible in relation to scope and contractual commitment.
As a fully-detailed design is not required the client can obtain tenders at the early stages of a project and begin construction before completion of the design. So to this extent it is 'fast track'.

The disadvantages include:

Additional resources are required to measure work and certify payments.
The client does not have a final price when committing to starting work.
It is difficult for contractors to plan long-term resources and so might mean changes to personnel with loss of continuity.
Contractors may be tempted to front-load costs in case later work does not materialise.
There is no real incentive for contractors to treat such work with any sense of urgency and its best staff will be placed on the projects where the contractor is carrying more risk.

The tender documents will be a substantial package looking like a bill of quantities with numerous options and discount opportunities based on quantity.

Tender documents might have the following headings:

Methods of measurement.
Qualification of star and proportional rates.
Site preliminaries.
Treatment of overtime rates.
Codes of practice.
Inclusion of protection, waste, transportation and health and safety compliance.
Approved list of suppliers.
What is included in rates,such as all subsistence and travel expenses.
Client direct supplies and directly employed tradesmen.
Testing and commissioning.
Curved work premium.
Definitions as used in the document.

Each of these headings will cover numerous elements which then have to be broken down into pricing units. For instance brick, blockwork and masonry might include a section called natural marble or granite slabs/tiles of any shape, size pattern or colour :

A number of indices are available providing benchmark rates that can be used for estimating purposes, such as the BCIS Schedule of Rates, the PSA Schedule of Rates, and so on.