What’s This Going To Cost?

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An Overview Of Pricing Methods

Good question! If you have already selected a pricing method, the answer is very straightforward. If you haven’t, here’s a quick “take home point.” You can learn a lot about any geotechnical service provider by how well they help you to choose a pricing method for your project. Rembco has been helping our clients to understand their options and choose their best pricing scheme for over 30 years.

Pricing Methodology and Risk

Estimating any type of construction involves uncertainty and most geotechnical construction occurs under tons of earth where it is difficult to know the conditions. Estimating these costs presents an added degree of uncertainty. How deep to competent rock? What types of soil will we encounter? Are there underground structures? Will we encounter materials such as trees or construction debris? What drilling method will work best?

The answers to these questions will determine what construction methods and what equipment to use…how many crew members will be required…and for how long. So it becomes clear. Uncertainty in these areas equals risk, and risk impacts pricing. In fact, risk…how much there is and who will assume it… is the basis of the pricing methods that we will consider here.

The three types of risk in geotechnical work are:

1. Technical – the risk related to choosing a solution that will perform to specifications.

2. Quantity – the risk related to accurately estimating the scope of work.

3. Duration – the risk of predicting the time it will take to complete the work.

Mike Bivens, Chief Engineer at Rembco, explains, “There are three common methods for pricing geotechnical services – lump sum, unit pricing, and time and materials. Each uses a different approach for assigning risk” says Bivens, “and the level of risk that the contractor accepts is reflected directly in the pricing.”

Lump Sum Pricing

Charging a flat rate for a job means that the construction contractor assumes all the risk – technical, quantity and duration. This method is frequently used when the client needs a firm price and cannot allow the price to creep if adverse conditions are encountered. Soil nailing is a good example because it usually has well defined scope and a very predictable quantity. Lump Sum is cost effective for projects with limited risk, but projects with elevated risk will be expensive.

Unit Pricing

When geotechnical work is charged by linear feet drilled or by volume of grout pumped, all of the quantity risk is shifted to the client. Unit pricing is generally used on projects where the quantities are unpredictable. For instance, micropiles are frequently unit priced when the depth to rock is uncertain. Likewise, sinkhole remediation is commonly unit priced because of the unpredictable variations in depth and subsurface conditions. Unit pricing allows the client to pay only for the exact amount of drilling performed and grout pumped.

Time and Materials Pricing

Time and materials pricing, commonly used where the quantities are unknown and the speed of the work is affected by factors outside the contractor’s control, places the risk for quantity and duration on the client, while the risk of technical performance remains with the contractor. This method is commonly used on projects where the scope is difficult to define or very difficult to control. For instance, time and materials would be a preferred method for pricing a project where there was very little geotechnical information about the jobsite, or where other, higher priority activities on the site might suspend the contractor’s work suddenly, frequently and for unpredictable amounts of time.

“Rembco makes it a priority to understand each client’s situation and to recommend the best solution,” says Bivens. “We provide complete, design-build solutions, suggest the best pricing strategy and recommend the most cost effective solution.” “Sometimes that might mean a reduction in the scope of the job,” he continues. “If we discover conditions that reduce the scope and cost of the project, we’re happy to pass those savings along to our client. We view each project as a partnership, and we want our clients to succeed.”

If you have questions about pricing, don’t hesitate to contact our Lead Estimator at james.grubbs@rembco.com or 865-671-2925.

Rembco

About Rembco

Rembco is a geotechnical contractor that specializes in foundation support, soil stabilization and specialty grouting. Rembco offers micropiles, minipiles, soil nailing, rock anchors, pressure grouting, compaction grouting, compaction piles, chemical grouting, sinkhole repair, soil anchors and more. Headquartered in Knoxville, TN, Rembco has been providing geotechnical services (ground improvement, rock slide stabilization, excavation shoring, sinkhole remediation, hazardous material encapsulation, and underground liquid migration control) for over 30 years, serving clients throughout the nation.

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