Price is the amount of money one party pays another in return for goods, works or services. In construction, pricing is the process of deciding the sum to be asked for carrying out a project or part of one.
Price and cost are not the same. A contractor’s cost is what it spends on labour, plant, materials and subcontractors, while its tender price adds overheads, profit and an allowance for risk, adjusted by commercial judgement about the market. Depending on market conditions and how keen the contractor is to win the work, the price may be more or less than the cost. Under NEC contracts, “the Prices” is a defined term whose meaning depends on the main Option chosen, for example the lump sums in the Activity Schedule under Option A or the rates and quantities in the Bill of Quantities under Option B.
Related terms: cost, tender, overheads and profit, contract sum.
