From take-off to cash flow: BOQs, markups, escalation and S-curves
How an estimate is built: measured quantities times rates, then preliminaries, overhead and profit, contingency and GST, escalated to the construction period and spread over time as an S-curve.
An estimate is only as good as its quantities. Measure first, using consistent units and a clear method of measurement, and then apply rates that each include labour, plant and materials. Everything else in the estimate is a markup on that measured core.
The markup stack
- Measured work: Σ quantity × rate.
- Preliminaries: site establishment, supervision, insurances, temporary works and so on. These are often 8–15 % on building work, but price them item by item when you can.
- Overhead and profit: the contractor's business costs and margin.
- Contingency: for risk that has not been priced. Reduce it as design develops.
- GST at 10 % in Australia on the final amount (most estimates are reported both ex and incl. GST).
Escalation
Rates are usually priced at a base date. If construction starts 18 months later at 4 % a year, the escalation factor is 1.04^1.5 ≈ 1.06. Escalating to the middle of construction adds half the build period. Published construction price indices are more defensible than a single assumed rate.
Cash flow
Clients need to know when money goes out, not just how much. Spreading the total over the programme with an S-curve gives monthly forecasts that can be compared with actual claims. If actual progress falls below the curve early, it is a useful warning.