Tender Pricing Calculator
Turn direct cost into a tender price with P&G, overhead, and profit.
Build up a tender price from your direct cost by adding preliminaries & general (P&G), overhead, profit, and contingency — so you know the mark-up baked into your bid.
- Tender price (excl. VAT)R 1 392 16039.2% over direct cost
- P&G12% of directR 120 000
- Overhead + contingencyR 145 600
- Profit10%R 126 560
- Add 15% VATVAT-inclusive priceR 1 600 984
A simplified build-up: P&G is added to direct cost, then overhead and contingency on that base, then profit on the subtotal. Real tenders price P&G as measured items — treat this as a sense-check.
A worked example
With the calculator’s starting values (direct cost: 1000000 R; p&g (preliminaries): 12 %; overhead: 8 %; profit: 10 %; contingency: 5 %), it returns:
- Tender price (excl. VAT): R 1 392 160 (39.2% over direct cost)
- P&G: R 120 000 (12% of direct)
- Overhead + contingency: R 145 600
- Profit: R 126 560 (10%)
- Add 15% VAT: R 1 600 984 (VAT-inclusive price)
How the build-up works
The calculator starts with your direct cost: materials, labour, plant and subcontractors for the measured work. It adds preliminaries and general (P&G) as a percentage of direct cost, then overhead and contingency on that base, and finally profit on the subtotal. The result is the tender price before VAT, with the total mark-up over direct cost shown so you can see what you are really adding.
Mark-up is not margin
A mark-up is added to cost; a margin is a share of the selling price. They are easy to confuse and the difference matters. Adding 10% to cost gives a margin of about 9.1% of the price. Adding 25% gives a margin of 20%. If your business needs a 10% margin, you need to mark up by about 11.1%. Decide which one you are targeting before you start.
Pricing P&G properly
On a real tender, P&G is priced as items in the preliminaries bill rather than one percentage. In South African bills these are usually split into fixed charges (site establishment and de-establishment, for example), value-related charges (insurances and guarantees that scale with the contract value) and time-related charges (supervision, site offices, plant on standing time) that scale with the programme. Time-related charges are the ones you recover if the contract period is extended, so pricing them honestly protects you later.
Risks the percentages hide
- Escalation: on longer contracts, check whether contract price adjustment applies or whether you carry the inflation risk yourself.
- Retention: part of each payment is held back until completion and the end of the defects period, which affects your cash flow.
- Payment terms: allow for the time between doing the work and being paid.
- Provisional and PC sums: price your attendance and profit on them as the bill asks; they are not free money.
- Rates you have not checked: a few large items usually drive most of the price, so test those against current quotes.
Questions
- What is P&G in a tender?
- Preliminaries & General cover site-wide costs not tied to a single trade — site establishment, supervision, plant, insurances, and temporary works. It typically runs 8–15% of direct cost.
- How much profit should I add?
- Margins in SA construction commonly sit between 5% and 15% depending on risk, competition, and project size. Thin margins win work but leave no room for variations going against you.
- Should contingency be in my tender?
- A contingency protects against measured-but-uncertain risk. On lump-sum tenders it is often carried internally rather than shown; on cost-plus or provisional work it may be an explicit line.
Compiled by Setout. Figures are planning-stage estimates, not quotes.
Reviewed by Aidan Koetaan MBA PMP, quantity surveyor and construction project manager.