Stress-test the cost categories before holding a price for 18 months

One percentage can hide the real exposure

When a builder asks for a long price hold, adding ten per cent to everything feels quick and cautious. But different parts of the job may behave differently. Some costs are already committed, some remain uncertain and others depend more on the construction programme than on supplier prices. Start by identifying which is which.

Break the estimate into useful groups

Separate the major materials, labour, equipment, transport and other material costs. Note the quantity and rate behind each amount, along with its source and date. Mark any genuine commitment separately from a price indication. Avoid treating a supplier's current catalogue price as evidence that the same price will be available when the job finally starts.

Use a complete starting estimate

Business.gov.au's pricing guidance includes materials, labour and overheads among relevant costs. Before testing changes, check that the starting estimate contains the work you are actually promising. A detailed sensitivity calculation on an incomplete scope can produce a precise-looking answer that still understates the job. Unknown quantities should remain visible rather than disappearing into the margin.

Source: business.gov.au: Choose a pricing strategy

Change the exposed item first

Imagine a hypothetical job with $100,000 of estimated costs, including $50,000 of materials. If those materials rise twenty per cent and all other costs stay unchanged, the extra cost is $10,000. That is a ten per cent rise in total cost. It is a scenario, not a prediction or a reason to ignore other possible changes.

Test timing as another variable

Run a separate version for a later start or longer duration where those changes affect your estimate. Show the assumptions beside the result. Avoid combining every worst case without explanation, or presenting a best case as the expected outcome. The useful question is which change would make the proposed price unacceptable for this particular business.

Use the result in the negotiation

Identify the few assumptions that matter most and discuss them with the builder before agreeing. A shorter validity period, different procurement arrangement or reviewed contractual mechanism may need consideration. Obtain advice on the actual wording. Keep the calculation as the commercial reason for the discussion, rather than claiming it gives an automatic right to increase a signed price.