Construction industry pressures: protect your next quote

Sourceable has run a sponsored piece on the construction industry pressures bearing down on Australian builders, and nobody who has priced a job lately will be surprised by it. Material costs went up and stayed up. Good crews are hard to find and harder to keep. Margins vanish somewhere between the quote and the final invoice. The article is about the sector as a whole. What matters to you is the next job you price, probably on your phone in the ute between sites.

This is how it looks from that end.

The pressure is real, and small builders feel it first

Three things have been grinding away at the industry for several years.

Input costs. Material prices jumped hard through 2021 and 2022. Most of them settled at a higher base and never came back down. If you want the trend rather than the yard gossip, the ABS Producer Price Indexes track input costs for house construction every quarter.
Labour. Skilled trades are stretched thin, worst of all in the finishing trades and outside the capitals. When a sub is booked out, your programme slips. A slipped programme costs money you almost never priced in.
Insolvencies. In ASIC's insolvency statistics, construction is consistently at or near the top of the list by industry. The failures are not limited to the big names that make the news.

A large firm has a finance team and cash reserves to ride out a bad quarter. A five-person crew has one business account and a director's guarantee. That is why the small end of the market feels the pressure first.

Where construction industry pressures really bite: the quote

Most builders who go under can build perfectly well. They fail because a run of jobs was priced on numbers that were already out of date when the slab went down.

These are the leaks we see most often when we talk to builders:

Stale rates. A supplier price list from six months ago is a guess now. Using it on a job that starts in three months makes it a bigger guess.
Fixed price with no protection. Rise-and-fall clauses exist for exactly this situation. But state domestic building laws limit when and how you can use them on residential work, so check with your state regulator before you rely on one.
Contingency treated as profit. If the buffer is the only thing standing between you and a loss, it is not margin. It is the risk you have already accepted.
GST slip-ups. A price quoted to a homeowner should be the total they will actually pay, with GST included. Quoting ex-GST and adding 10% at invoice time is a quick way into a dispute.

Four moves that protect your margin

None of these are new ideas. Under pressure, though, the builders who actually do them are the ones still trading next year.

Re-price materials on every quote. Ring the supplier, get a written price with a validity date, and put a validity period on your own quote. Thirty days is common. Once it lapses, you re-price.
Cost labour at today's real rate. That means wages plus super, workers comp, leave and the hours nobody bills, like travel and pick-ups. If you are still pricing labour off a rate you set two years ago, you are paying the difference yourself.
Allow for delays in the programme. A few days of float on trades that are hard to book costs less than a crew standing around waiting.
Get variations signed before the work starts. "We'll sort it at the end" is how a $4,000 variation turns into a $4,000 argument.

Admin is a cost line too

Nobody quotes for the hours spent at the kitchen table at 9pm, rekeying measurements, chasing the latest supplier price or working out which version of the plans the client signed. Those hours are real. When margins are tight they are also the first thing that slips, and that is when the mistakes above creep in.

That is the case for getting quoting and job tracking out of spreadsheets and group chats. If you are weighing it up, our rundowns of the best construction estimating software and the best construction project management software for Australian builders cover what to look for. The test is simple. Does it save you hours each week, or does it give you another login to babysit?

The take from the tools

You cannot fix the pressure on the construction industry from your end. Material prices, interest rates and the skills shortage are all out of your hands. The quote is the one lever you control completely, and it is where a tough year is won or lost.

The builders who come through tight stretches are not always the best on the tools. They are the ones who know their numbers, price every job fresh and do not let a variation go unsigned. That discipline costs nothing, and it is worth more than any market forecast.

If you want a faster way to get the numbers right on site, the free Built Simple app puts our construction calculators on your phone with no signup needed. It is available on iOS and Android. Have a play next time you are working out quantities for a quote.