50 Questions on Bill of Quantities Pricing

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50 Questions on Bill of Quantities Pricing 1. What is the bill of quantities pricing method? Answer: In accordance with the **Standard ‘Specifications for Quantitative Pricing of Construction Projects (GB 50500—2013)’** (hereinafter referred to as the pricing specifications), together with the Pricing Tables for Construction, Decoration, Installation, and Municipal Engineering in Jiangsu Province (hereinafter referred to as the pricing tables), the rules for cost calculation, and project guidelines, the employer provides the quantities of work, while the bidder (contractor) sets its own prices. The winning bid is determined (and the contract price is fixed) through the prescribed evaluation methods. 2. What is a bill of quantities? Answer: A bill of quantities is a detailed list that shows the names of the various items constituting the construction project, including the individual work items, supplementary items, and other items, along with their corresponding quantities. ?? 3. When was the pricing specification for bill of quantities issued? When will the bill of quantities pricing system be implemented in our province? Answer: The \"Code for Valuation of Construction Projects based on Bill of Quantities\" is the **standard, and it has been in effect since July 1, 2003. Our province has been implementing it since April 1, 2004. 4. What are the requirements for cost management departments under the bill of quantities pricing method? Answer: (1) Do a good job in formulating consumption quotas, and use such quotas that reflect the average productivity level in society to guide and regulate the market. (2) Carry out dynamic management of project costs and establish a project cost management information system. Regularly publish the prices of various equipment, materials, and machine shifts, as well as various construction cost indices. (3) Further strengthen the supervision and management of the construction market. Do a good job in **macro-control** and the supervision of investment projects. 5. What steps has our province taken to implement the specifications for valuation based on bill of quantities? Answer: (1) Establish a dedicated leadership team for the promotion and implementation of the bill of quantities specifications, with a leader from the provincial construction department in charge serving as the team head. (2) Relevant pricing tables, guidelines, cost calculation rules, and related implementation documents were issued, providing a basis for the implementation of quantity lists in our province. (3) Active efforts were made to carry out training on pricing standards, with training provided to over 5,700 cost engineers and more than 30,000 cost estimation and review professionals across the province. (4) Thoroughly conduct research before and after the implementation of the list, keep track of its implementation status, and address related issues promptly. (5) To further advance the reform of quantity-based pricing in our province, we will intensify publicity efforts and launch a learning and awareness campaign to help all relevant parties understand the importance of proper implementation of the quantity list standards. 6. What is the current international management model for cost estimation benchmarks? Answer: Currently, there are mainly two management models for cost estimation standards internationally: (1) The Anglo-American model: The standards are established and issued by **industry associations and social intermediary organizations. For example, the ‘Rules for Quantifying Construction Works’ are established by the Institution of Royal Chartered Surveyors in the UK, while in the US it is the cost consulting firms that issue the ‘Engineering News-Record’ ； Additionally, local authorities in the United States have also established their own relevant standards and rules for use in investment projects; for example, the Washington State Development Authority has formulated \"hourly wage rates\" and \"rates for labor and materials,\" while California has issued a \"Construction Cost Guide.\" (2) Japanese model: **Uniformly establish quota standards. For example, the Ministry of Construction formulates and issues quota standards such as the \"Building Construction Cost Estimation Standards\", the \"Construction Project Standard Quotas\", and the \"Building Work Quantification Standards\". It can be seen that in countries with more developed market economies, fixed quotas still serve as an important basis for determining project costs; the differences in their management lie solely in the different agencies responsible for formulating and issuing them. 7. What is the purpose of adopting the bill of quantities pricing method? Answer: (1) To regulate the order of the construction market and meet the needs of socialist development; (2) To foster orderly competition in the construction market and the healthy development of enterprises. (3) Transform China’s management **functions. It has shifted from the previous practice of using **control-based quota pricing to a bill of quantities pricing method that meets the requirements of market economy principles, thereby effectively strengthening** macro-control. (4) Create a market competition environment that is in line with international practices for the development of market entities. 8. What is the significance of adopting the bill of quantities pricing method? Answer: (1) It helps to implement the principles of \"fairness, equity, and transparency.\" Both the tendering and bidding parties conduct their activities based on a unified bill of quantities, which makes the contracting process easier to manage and helps prevent fraudulent practices in the construction industry. (2) Quoting based on the bill of quantities can be carried out during the middle stage of design, which shortens the construction period and brings significant economic benefits to the owner. (3) The bidder is required to establish its own enterprise quota for project cost accounting, thereby improving its management level and competitiveness. (4) The list entries are concise and clear, which facilitates cost measurement by supervision engineers and settlement of project costs by cost engineers, thus accelerating the settlement process. (5) The bill of quantities clearly defines the allocation of project risks between the owner and the contractor. The owner assumes the risk of changes in the volume of work, while the contractor assumes the risk of price fluctuations, reflecting the principle of risk sharing. 9. What are the shortcomings of the original budget quota-based pricing method? Answer: (1) Quantity and price are combined, and prices lag behind, failing to reflect the prices of construction products in the market in a timely and effective manner. (2) The comprehensive nature of the comprehensive quota is high; the consumption associated with the actual construction work and the measures taken are not separated from each other, which hinders companies from leveraging their strengths to actively improve their construction plans and enhance their competitiveness. (3) The volume of work is calculated based on the drawings, the corresponding sub-items are applied, fees are charged at specified rates, adjustments are made in accordance with relevant policy documents, and enterprises have limited autonomy in setting prices. Bidding processes often turn into de facto rate bidding. It fails to fully reflect fair competition in the market, and it is also difficult to determine whether the price is below cost. 10. What are the basic principles of the bill of quantities pricing method? Answer: The activity of pricing based on the bill of quantities should adhere to the principles of objectivity, fairness, and impartiality. (1) The preparation of the bill of quantities should be based on facts, without any fraud; bidders should be treated equally and fairly. (2) Bidders must base their bids on the actual conditions of their own companies; they shall not submit bids below cost, nor shall they collude in setting prices. (3) The contracting parties shall conduct the project settlement with honesty and good faith. 11. Which types of projects are suitable for valuation using the bill of quantities method? Answer: (1) For all large- and medium-sized construction projects funded entirely or primarily by state-owned funds, the bill of quantities pricing method must be adopted ； For other construction projects subject to tendering in accordance with the law, the quantity-based pricing method shall be adopted. For construction projects that are not subject to bidding in accordance with the law, the unit price method or the pricing schedule method can be used for valuation. (2) In all cases where the bill of quantities pricing method is adopted, regardless of whether the funds originate from state-owned funds, foreign funds, loans, aid funds, or private funds, the provisions of the pricing specifications must be complied with. 12. What are the main characteristics of quantity-based pricing in construction projects? Answer: (1) It is mainly applicable to tendering and bidding activities in construction projects. (2) The tenderer is required to provide the bill of quantities and bear the risk associated with the quantities specified in it. (3) Subject to meeting the requirements specified in the tender documents, the bidder may determine the amounts required for labor, materials, and machinery, as well as the associated costs, based on its own enterprise standards or by referring to the consumption standards issued by the construction administration authorities; the prices are determined according to market conditions. 13. What are the differences in the pricing procedures between the bill of quantities pricing method and the traditional pricing methods? Answer: The original pricing method involved calculating the direct costs for each individual construction element based on the budget quotas, adding adjustments for material price changes, and then determining the comprehensive indirect costs, fees, other expenses, and taxes based on either the direct costs or labor costs specified in the quotas, thereby forming the total cost of the project. The quantity-based pricing method follows the principle of separating quantity from price, by distinguishing between the physical consumption required for the project and the costs associated with construction measures. It consists of costs for various components of the project, costs for construction measures, other related costs, as well as fees and taxes. 14. What are the characteristics of the specifications for valuation based on bill of quantities? Answer: (1) Mandatory: The provisions marked in bold in the regulations are mandatory and must be strictly implemented. In accordance with the pricing regulations, large and medium-sized construction projects that are funded entirely with state funds or primarily with state funds must adopt the bill of quantities pricing method ； For other construction projects subject to tendering in accordance with the law, the quantity-based pricing method shall be adopted. (2) Uniformity: Four aspects of uniformity, namely unified project codes, unified project names, unified measurement units, and unified rules for calculating the volume of work. (3) Competitiveness: The consumption amounts and unit prices for labor, materials, and machinery listed in the bill of quantities are determined by enterprises based on their own standard costs and market price information, with reference to the average social consumption standards issued by the construction authorities. (4) Practicality: In the pricing specifications, the project names are clear and explicit, the rules for calculating the quantity of work are simple and straightforward, and the project characteristics and scope of work are listed, which facilitates the determination of the project cost. (5) Universality: It is in line with international practices and meets the requirements for standardization of quantity calculation methods, uniformity of quantity calculation rules, and market-based determination of project costs. 15. What are the consumption quotas issued by the administrative authority in charge of construction? What is a corporate quota? The level difference between the two? Answer: (1) The consumption quota is the average social consumption of labor, materials, and machinery required to produce one unit of qualified product under normal construction conditions, as determined by the construction administration authority based on a reasonable construction plan. (2) The enterprise quota refers to the consumption levels of labor, materials, and machine hours established by a construction company based on its own construction techniques and management capabilities, as well as relevant data on project costs, for use within that company. (3) The standard consumption amount reflects the average production and management level of society, while the enterprise-specific standards reflect the average production and management level within each individual enterprise. 16. What is the guiding principle behind the formulation of the specifications for quantity-based pricing? Answer: (1) **Macroeconomic regulation; enterprises set their own prices, with prices determined through market competition.** (2) The principle of being both organically integrated with the current budget quotas and distinct from them. (3) The principle of taking into account the current status of project cost management in our country while striving to align with international practices as much as possible. 17. What are the bases and principles for formulating the specifications for quantity-based pricing in projects? Answer: The Specifications for Valuation Based on Bill of Quantities were formulated in accordance with the Law of the People’s Republic of China on Bidding, Ministry of Construction Order No. 107 on the Management Methods for the Assignment and Contracting of Construction Projects, and in line with the needs of reform in China’s construction cost management; they are established on the principles of **macro-control and price formation through market competition**. 18. Under the quantity-based pricing system, after enterprises submit their own quotes, what is the role of the accompanying pricing table? Answer: The pricing scale in our province is based on fixed consumption quotas, reflecting the average level of social labor productivity. It serves as a reference for bidding quotes and settlement audits, and is the basis for setting base bids and resolving cost-related disputes. The subdivision of items in the pricing table is more in line with the classification of the work contents specified in the specifications. Therefore, when companies submit bids, they are required to enter the quota numbers in the column indicating the work contents. The quantities of work for each task are calculated using the rules and units of measurement specified in the pricing table. This provides bidders with a unified principle for determining comprehensive unit prices, which serves as a basis for the evaluation committee to decide whether a bid is competitive in terms of price, as well as a basis for settlement audits. 19. What are the differences between the project settlement method after implementing the bill of quantities and the original fixed-quantity method? Answer: The differences between the settlement method for projects priced based on a bill of quantities and that for projects priced according to fixed rates are as follows: under the bill of quantities pricing method, the comprehensive unit price generally remains unchanged; there is no price difference, nor is it necessary to adjust any of the rates. 20. What are the requirements for preparing the base price after implementing the bill of quantities? Answer: The Law on Bidding and Tendering stipulates that where a base price is set for a tendered project, it should be taken into consideration during the evaluation process. This reference role of the base price determines that its establishment must be subject to certain requirements. Such requirements are mainly reflected in the fact that the base price should be calculated on the basis of reasonable construction plans, in accordance with pricing standards, pricing tables, and regulations regarding cost quotas; meanwhile, material prices should be determined based on the market guidance prices issued by the local cost management authorities. 21. When using a bill of quantities to determine the base price, it is necessary to first establish a construction plan step by step. How should the tenderer or consulting agency formulate a reasonable construction plan, and what are the criteria for doing so? Answer: The base price refers to an estimated price prepared by the tenderer or the engineering cost consulting firm hired by them based on the bill of quantities; it represents the tenderer’s expectation for the budget of the construction project. The base price is not the standard price that determines whether a bid will be successful, but rather it serves as a reference value for evaluating and comparing bids. Therefore, when preparing the base price, the tenderer or consulting agency must take into account the specific circumstances of the project, consider the mandatory construction standards and regulations related to quality, safety, and environmental protection in terms of project costs, and prepare the price using normal and reasonable construction methods and plans. 22. Which entities are qualified to prepare the bill of quantities and the base price? Answer: Article 9 of the “Measures for the Administration of Pricing in the Contracting and Subcontracting of Construction Projects” issued by the Ministry of Construction of the People’s Republic of China (Order No. 107) states that: “The tender base price and bill of quantities shall be prepared by the tenderer who has the capability to prepare tender documents, or by a qualified construction cost consulting firm or tendering agency entrusted by the tenderer.” The “intermediary agencies” referred to in Article 3.1.1 of the Pricing Code are consistent with those defined in the ministerial decree. 23. What are the requirements for preparing a bill of quantities? The bill of quantities serves as the basis for bidders to submit their quotations, and it is an inseparable component of the tender documents that is binding on both the tenderer and the bidders. (1) It shall reflect the engineering projects that the tenderer requires the bidder to complete, as well as the corresponding quantities of work, and other tasks necessary to carry out these projects, providing a comprehensive overview of the requirements regarding the bid price. (2) The description of project characteristics should be concise and clear. The quantity of work provided is accurate, with no missing items. 24. With quantity-based pricing, how is the contract price determined? Answer: The contract price methods include fixed price, adjustable price, and cost plus fee. Bill of Quantities pricing is a method of pricing. These are concepts from two different categories. Under the quantity-based pricing method, the contract price can be determined using any one of the fixed-price, adjustable-price, or cost-plus methods. A fixed-unit-price contract is suitable for the valuation method based on the bill of quantities. In the case of a fixed-price contract, the contractor and the employer shall determine the accuracy of the quantity list, or specify in the contract the method for adjusting the price in the event of errors in the quantity list. For projects with a long duration, after establishing the base price at the time of bidding, the parties must agree on methods for adjusting the contract price in the special clauses.