Capital Projects Routes to Pricing:
Which procurement approach is right for your project?
This is a companion to our pillar blog, ‘Project Pricing – From Brief to Budget’. There we set out why design and costing decisions shape the whole project. Here we go deeper on one of the most consequential of those decisions: how you choose to buy the work.
Procurement route isn’t an administrative detail. It determines who carries which risks, how much cost certainty you have, how early you can secure your supply chain, and how collaborative the relationship will be. This blog is written for estates managers, procurement teams and finance leads who want to make that choice deliberately rather than by default.
What are the main routes to pricing, at a glance?
Fixed price (lump sum)
One price for a defined scope, based on designs produced by the customer’s own professional design team. It works best when the design is genuinely complete and the scope is stable. It gives strong cost certainty, but a lump sum priced against an unfinished design is a false comfort, because anything not fully specified comes back as a variation.
Schedule of rates
Agreed unit rates, paid as the work is measured. This suits situations where the full extent of the work is not yet known, which is common in refurbishment and reactive works. It is flexible, but more of the cost risk sits with you, so it needs active management.
Cost-plus / open book
Actual cost plus an agreed margin, with transparent books. It builds trust and works well in established, collaborative relationships. To get the benefit, you need enough capacity on the customer side to engage with the level of detail involved.
Target cost with pain/gain share
A target is set, and savings and overspends against it are shared on agreed terms. It aligns both parties around the same number and rewards genuine value engineering and efficiency, making it a strong middle ground between certainty and collaboration.
Design and Build
Appointing a Design and Build (D&B) contractor to take on the full design and delivery. This is often done under a Pre Contract Services Agreement (PCSA), which ensures the customer’s requirements are embedded from the start, covering scope, design, programme, planning and the legislative detail needed to build an accurate cost plan. That work is completed before the project moves into a similarly formal main contract for the delivery phase. Both stages are typically run using national standard forms of contract, such as those produced by the Joint Contracts Tribunal (JCT).
What is single-stage versus two-stage tendering?
Beyond the pricing model, you also choose how many stages your tender runs to. The single-stage, or ‘traditional’, approach takes your completed design to market once. It is competitive and clean, but it only works when the design has been finished by your appointed professional design team, and even then there are still areas of final design left to the contractors. Under a two-stage approach, you appoint a contractor early on a fixed lump sum fee, on time and materials or hourly rates, or on a cost reimbursable basis, to complete the design collaboratively and build up the full price. Two-stage is where early contractor involvement lives.
IN OUR EXPERIENCE
In our experience, a PCSA, a form of early two-stage engagement, gives the most comprehensive and accurate pricing and lead-in times, with practical buildability at its core. Because equipment, plant and materials pre-orders can be placed during the PCSA, both cost and programme are optimised before the main contract starts. On M&E-heavy and refurbishment projects, that early certainty and practical dimension consistently outperforms the apparent simplicity of a single-stage lump sum.
How procurement route connects to design stage
Procurement and design are not separate workstreams. The route you choose determines how complete the design needs to be before you go to market, and how much influence the contractor has over buildability. A common and costly misconception is that once planning is approved the design is complete and ready to be tendered, it isn’t. Planning consent is not the same as a fully resolved technical design.
This maps directly onto the RIBA Plan of Work. Our ‘RIBA Stages Demystified’ blog explains where procurement sits in the design process and why tendering too early causes problems.
IN OUR EXPERIENCE
Where procurement routes create challenges
The routes that create the most challenges for us as a main (or principal) contractor are those where the customer dictates specific manufacturers or subcontractors over whom we have little control. When something we are accountable for depends on a party we cannot effectively manage, both price certainty and programme certainty weaken. Equally, pricing becomes difficult and inaccurate when the design is incomplete or incorrect, it delays procurement and risks costly changes and delays to orders already placed.
Frameworks and public sector obligations
Public sector customers carry procurement obligations that shape the available routes, but frameworks can turn that constraint into an advantage. A well-structured framework gives you a compliant, pre-agreed route to a pre-qualified and vetted delivery partner, continuity of team, and better value over time, with work called off as needed rather than re-tendered from scratch.
See Framework Procurement for the compliant routes we offer private and public sector customers.
Choosing your route
There is no universally best route, only the best route for your project’s size, complexity, risk appetite, programme and internal resource. The thread running through all of it is information: the more completely you understand your project requirements, the scope and the existing building, the more pricing routes work in your favour.
Talk to our Projects & Engineering team about the right route for your next capital project or explore our project case studies.
