How to read a builder's quote

Most homeowners get three quotes and compare the totals. It is the natural thing to do and it is close to useless, because the three documents almost never describe the same job. One includes the kitchen, one allows a sum for it, one excludes it entirely. One has scaffolding in the preliminaries, one has it as a provisional sum, one forgot it. The totals differ by thirty per cent and the difference has nothing to do with either builder's price.

Here is what each part of a quote actually means, and where to look first.

Quote or estimate? Not the same word

A quotation is a fixed offer to do defined work for a stated price. Accept it and it becomes a contract term. The price can only change if the work changes.

An estimate is a considered guess. It is not binding, and the final figure can be higher.

Builders use the words loosely, so read what the document says rather than what it is titled. If it says "estimate" anywhere, ask directly whether the price is fixed and get the answer in writing. If a document has no defined scope at all, it is neither — it is a number.

Preliminaries

Preliminaries — "prelims" — are the costs of running the site rather than building anything: scaffolding, skips and waste disposal, welfare facilities, temporary protection, site management and supervision, insurance, plant hire, setting up and clearing away.

They are real costs and they are substantial, and a quote that does not show them is not cheaper — it has buried them in the rates or left them out. If one quote lists prelims as a separate section and another does not mention them, that alone can account for a large part of the difference between the two totals. Ask the second builder where they are.

Provisional sums and prime cost sums

These two get used interchangeably and mean different things.

• A prime cost sum — a PC sum — is an allowance for the supply of something you have not chosen yet. Sanitaryware, tiles, ironmongery, the kitchen. The builder allows a figure; you go and choose; the difference is adjusted up or down. The labour to fit it is priced separately and does not change.
• A provisional sum is an allowance for work that cannot be fully defined at the time of quoting. Underpinning to an unknown depth, drainage alterations before anything has been dug up, making good to a wall nobody has opened yet.

Both are honest devices. Both are also where a fixed price stops being fixed. So the question to ask of every provisional sum is: what would make this go up, and by how much? A builder who can answer that specifically has thought about your job. A builder who has put a provisional sum against half the work has quoted a range and called it a price.

A special note on tiles and sanitaryware allowances: they are frequently set low, because a low allowance makes the total look better. Find out what the allowance actually buys before you assume it is enough.

The exclusions list is the most informative page

Read it first. Everything a builder has deliberately kept out of the price is listed there, and it tells you more about the scope than the inclusions do.

The ones that most often appear, and most often surprise people:

• Structural engineer's fees, and the architect's or designer's fees
• Planning and building control application fees
• Party wall surveyors' fees
• Utility diversions, and any Thames Water build over agreement
• Kitchen and appliances, floor finishes, decoration
• Asbestos survey and removal
• Unforeseen ground conditions, or foundations below an assumed depth
• Works to the existing house outside the extension footprint — the bit of hallway that has to be replastered where the new opening meets it

None of these are unreasonable exclusions. But two quotes will exclude different ones, and until you have both lists side by side the totals mean nothing.

VAT

Check whether the price includes VAT and whether the builder is VAT registered. A quote excluding VAT sits a fifth below one that includes it, and that is the single largest source of apparent price difference we hear about.

Most domestic building work is standard rated. There are genuine exceptions — a reduced rate applies to work on a dwelling that has been empty for a qualifying period, and to certain conversions that change the number of dwellings in a building. These are real reliefs with specific conditions, and they are worth asking about if your property might qualify, but they are not something a builder can simply apply because you asked nicely.

Payment stages

You are looking for payments that follow completed work, not payments that fund it. A reasonable schedule ties each stage to a visible milestone: foundations complete, structure up and watertight, first fix complete, plastered, practical completion.

What to be wary of: a large deposit before anything happens; payments on dates rather than on progress; a schedule that is front-loaded so that by the time the job is two-thirds built you have paid ninety per cent. The last one is the pattern that leaves homeowners with no leverage exactly when they need it.

A modest advance to cover materials ordered specifically for your job is normal. A third of the contract sum before the first delivery is not.

Retention is a small percentage of each payment held back and released after a defects period — commonly six months. It is standard on larger contracts and worth having. It is the mechanism that gets someone to come back and fix the door that has dropped.

Contract, insurance, and the paperwork nobody reads

For anything beyond a small job, use a written contract rather than an accepted quote. The JCT Building Contract for a Homeowner and the equivalents from the trade federations are short, plain-English documents that cover variations, delays, payment and what happens if things go wrong. They protect both sides, and a builder who resists one is telling you something.

Ask for the insurance certificates and check the dates. Public liability, employer's liability — which is a legal requirement for anyone with employees, with a statutory minimum indemnity of five million pounds — and contract works insurance covering the partly built structure. Check whose policy covers the works, because your own buildings insurance very likely does not once the roof is off.

Check the certifications that have to exist by law: notifiable electrical work certified under Part P, gas work by a Gas Safe registered engineer, and a building control completion certificate at the end. That last document is the one your buyer's solicitor will ask for.

Finally, if you sign a contract in your own home rather than at the builder's premises, the consumer contracts regulations generally give you a cancellation period, and the builder is required to tell you about it in writing. A builder who provides that notice unprompted is a builder who has read the rules.

The three questions worth asking every builder

• What is not in this price?
• Which of these provisional sums is most likely to move, and what would move it?
• Who will be on site every day, and who do I call when something is wrong?

The answers to those three tell you more than the total does.