Minimum and Maximum Price vs. Fixed Pricing!
Welcome to the Third part of this very important topic. In the previous articles we discussed what Contingency Sums are and the various options for arriving at a contingency sum, we also mentioned that pricing a job and winning a job are two different objectives.
Winning a contract
with Contingency Sums or tags can be difficult to achieve, everyone wants a fixed price. Method 3 from above, where you will calculate the worst case scenario for each particular risk, can be the most desirable, but unfortunately is also the most time consuming method.
This approach of detailing can accommodate a Gross Maximum Price (a fixed price) while showing a minimum price as well, and if you understand sales, this can be a valuable option. In reality, you are not pricing a job because you want to know the price; your real agenda is to secure a contract with the client, so getting a sale is more important than calculating the price. Demonstrating detail, however, can be the key to a sale in a competitive market, and give you breathing room to ensure you can deliver the quality they want within the price range given.
Arriving at that detail is the dilemma, thankfully we have various options for you to use that will increase your probability of achieving the sale. These options also make claims processing from your contingency allowances faster and easier to manage, which will be discussed in the next article of this series.
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