Quoting for Construction Projects: How to Handle Materials Volatility, Subcontractors, and Scope Changes

Construction quoting is a different animal from quoting a service call or a straightforward installation. The jobs are bigger, the timelines are longer, the variables are more numerous, and a single estimation error can wipe out the margin on a project that took six months to complete.

The fundamentals are the same — labour, materials, overheads, margin — but the complexity of each input multiplies. Material prices shift between quote and procurement. Subcontractors provide pricing that may or may not hold. The scope changes mid-project because it always changes mid-project. And the customer expects a fixed price for something that is, by nature, not fixed at all.

Getting construction quoting right isn’t about being a better guesser. It’s about building systems and processes that manage the uncertainty — so when things change (and they will), you’re protected.

The Materials Problem

Material cost volatility has always existed in construction, but the last few years have made it impossible to ignore. Timber prices that doubled in twelve months. Steel fluctuations of 20-30% quarter to quarter. Concrete, copper, and insulation all moving unpredictably.

When you quote a project that won’t start procurement for three months and won’t finish for nine, the material prices in your quote are historical data, not current reality. Every week between quoting and purchasing is a week where your margin can erode without anyone making a mistake.

Practical strategies for managing material volatility:

• Build rise-and-fall clauses into contracts. For projects over a certain value or duration, include a clause that allows pricing to adjust based on published material indices. This is standard practice on government and large commercial projects, and increasingly common on mid-size work. It protects both parties — the builder isn’t eating unexpected cost increases, and the client isn’t paying inflated contingency to cover the builder’s risk.
• Quote material costs with a validity period. “Material pricing valid for 30 days” is a simple but effective safeguard. If the project doesn’t start within 30 days, you reserve the right to requote the materials component.
• Separate materials from labour in your pricing. When materials are a distinct line item (or group of line items), it’s much easier to adjust them without requoting the entire project. This also gives the client transparency — they can see that the increase is a market-driven material cost, not you padding the margin.
• Lock in supplier pricing early. Where possible, get written pricing from suppliers that’s valid for a defined period. Some suppliers will hold pricing for 60-90 days. That guarantee is worth pursuing, even if it means committing to a purchase order earlier than you otherwise would.

Subcontractor Pricing

On most construction projects, subcontractors represent 40-60% of total cost. Getting their pricing right — and keeping it current — is critical.

The challenge is timing. You need subcontractor quotes to build your own quote, but subcontractors are busy and their pricing has a shelf life. A sparkie who quoted $38,000 for a commercial fit-out six weeks ago may not hold that price today — especially if their workload has increased or material costs have shifted.

Managing subcontractor pricing in your quotes:

• Get quotes in writing with a validity date. Verbal pricing isn’t pricing. Written quotes with clear scope and validity dates are the minimum.
• Requote subcontractor components for projects with long lead times. If the project won’t start for four months, the subcontractor pricing in your original quote is probably stale. Build in a requoting step before you finalise your price.
• Include subcontractor escalation clauses for long-duration projects. Similar to material rise-and-fall, some contracts allow subcontractor costs to be adjusted if the project timeline extends beyond the original programme.
• Track subcontractor accuracy over time. Which subbies consistently come in on budget? Which ones always have variations? This data should inform both your quoting (add contingency to the unreliable ones) and your supplier selection.

Contingency: The Art of Pricing What You Don’t Know

Every construction quote needs contingency. The question is how much, and how to apply it.

The common approach — slap 10% on the total — is better than nothing but it’s crude. A 10% contingency on a straightforward new build is probably excessive. A 10% contingency on a heritage renovation is almost certainly not enough.

A smarter approach: risk-based contingency.

Assess each major component of the project for risk level:

• Low risk (new work, standard specifications, reliable suppliers): 3-5% contingency
• Medium risk (renovation work, complex site conditions, long timelines): 8-12% contingency
• High risk (heritage work, unknown underground conditions, first-time scope): 15-20% contingency

Apply contingency at the component level, not the project level. The structural steel on a new commercial build might need 5% contingency. The façade restoration on the same project might need 15%. Averaging them into a single 10% means you’re over-contingent on the steel and under-contingent on the façade.

Progress Billing and Variations

Construction projects are rarely paid in a lump sum. Progress claims — monthly or milestone-based — are the norm. Your quoting system needs to account for this from the start.

Progress billing considerations at quoting stage:

• Define milestones or claim intervals in the quote. The customer should know upfront when they’ll be billed and approximately how much. “Monthly progress claims based on work completed” is standard, but specifying key milestones (e.g., slab complete, frame up, lock-up, practical completion) gives both parties clearer expectations.
• Build your quote structure to support progress claims. If your quote is a single lump sum with no breakdown, producing a progress claim that shows percentage complete by work category is painful. Structure the quote in sections that map to how work will be completed — it makes progress claims almost automatic.
• Account for retention. Most commercial construction contracts include retention — typically 5-10% of each progress claim held back until defects liability is complete. Your cash flow projection (and your margin calculation) should account for this.

Variation Management

Variations are the biggest source of disputes in construction. They’re also, when managed properly, a legitimate source of additional margin.

The key is process. Every variation should be:

1. Documented — scope change described clearly
2. Priced — labour, materials, margin calculated and presented
3. Approved — client signs off before work proceeds
4. Tracked — cumulative variation value visible against original contract sum

When variations are handled verbally or after the fact, everyone loses. The builder can’t demonstrate what was agreed. The client gets surprise invoices. The project manager can’t track the true project cost.

When Spreadsheets Hit Their Limit

Most construction businesses start with spreadsheet-based estimating. It works — until it doesn’t. The breaking point typically comes when:

• Multiple estimators need consistent pricing and methodology
• Material prices need to be updated across dozens of active quotes simultaneously
• Subcontractor pricing is tracked across multiple projects and needs to be compared
• Progress claims need to be generated from the quote structure
• Variation tracking needs to feed back into the project’s financial position

At that point, the spreadsheet isn’t just slow — it’s a liability. A formula error in a $2M estimate doesn’t get caught because nobody audits the spreadsheet. A material price gets updated in one cell but not another. A subcontractor quote expires and nobody notices.

Purpose-built estimating systems solve these problems not by being fancier, but by enforcing consistency, maintaining current pricing, and connecting the quote to the rest of the project lifecycle. The quote becomes the foundation for procurement, progress billing, and final accounting — not a document that sits in a folder while the real numbers live somewhere else.

The best time to move beyond spreadsheets is before the mistake that makes it urgent. The second best time is right after that mistake, while the pain is still fresh enough to justify the investment.