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Plain-English definitions of the construction and tendering terms Australian tradies deal with every day.
A Bill of Quantities (BOQ) is an itemised list of the materials, parts and labour required to complete a construction project, with measured quantities for each item.
Read moreA quote is a fixed price offered directly for a clearly defined job; a tender is a formal, competitive submission — usually including price, methodology and supporting documents — made to win a contract.
Read moreA provisional sum is an allowance included in a fixed-price construction contract for an item of work that is not yet fully defined, adjusted to the actual cost once that work is designed and carried out.
Read moreA prime cost (PC) item is an allowance in a building contract for supplying a specific product that has not yet been selected, adjusted to the actual purchase price once the client makes their choice.
Read morePreliminaries (prelims) are the project-wide costs of running a construction site — supervision, site establishment, scaffolding, temporary services and insurances — that sit outside any single trade item.
Read moreA variation is an agreed change to the scope of a construction contract — adding, removing or altering work — with a corresponding adjustment to the price and/or time.
Read moreRetention is a percentage of each progress payment withheld by the client during construction as security that the contractor will complete the works and rectify any defects.
Read morePractical completion is the point at which the works are complete enough for the client to use them for their intended purpose, apart from minor defects still to be rectified.
Read moreA progress claim is a request for payment a contractor submits for work completed to date, usually at agreed intervals or milestones during a project.
Read moreA scope of works is a written description of exactly what work is included in a job — and what is excluded — so all parties agree on what is being priced and delivered.
Read moreA defects liability period (DLP) is the set timeframe after practical completion during which a contractor must return and rectify any defects that appear in the completed works, before final completion and the release of the remaining retention.
Read moreLiquidated damages (LDs) are a pre-agreed daily or weekly rate written into a construction contract, payable by the contractor to the client for each day the works remain incomplete past the date for practical completion.
Read moreLatent conditions are physical conditions on or below a construction site — such as unexpected rock, contamination, groundwater or hidden services — that a competent contractor could not reasonably have anticipated at the time of tendering.
Read moreDay works (dayworks) is a method of valuing construction work — typically a variation that cannot practically be priced any other way — based on the actual labour hours, plant and materials used, charged at agreed daywork rates plus a percentage for overheads and profit.
Read moreA contingency sum is an allowance built into a construction budget or estimate — usually a percentage of project cost — to cover unforeseen costs and risks that cannot be specifically identified when the price is set.
Read moreMargin is profit expressed as a percentage of the selling price, while markup is profit expressed as a percentage of cost — the same dollar profit produces two different percentages depending on which one you calculate.
Read moreA cost-plus contract pays the actual, documented cost of the work plus an agreed fee or margin, while a fixed-price (lump sum) contract sets one agreed total price upfront regardless of the contractor’s actual costs.
Read moreA lump sum contract is a construction contract in which the builder agrees to complete a clearly defined scope of work for one fixed total price, regardless of what it actually costs the builder to deliver.
Read moreA schedule of rates is a list of agreed unit rates for items of work, priced in advance but without fixed quantities attached, so the final cost depends on the quantity of work actually measured and carried out.
Read moreA provisional quantity is an estimated amount of work included against a priced item in a contract — with the rate fixed but the quantity subject to remeasurement once the work is actually carried out and measured on site.
Read moreThe contract sum is the total price stated in a construction contract for the works at the time it is signed, including any provisional sums and prime cost allowances, subject to later adjustment for variations and reconciliations.
Read moreThe superintendent is the person appointed under a construction contract — commonly AS4000 or AS2124 — to administer the contract on the principal’s behalf, certifying claims, valuing variations and assessing extensions of time.
Read moreA Request for Information (RFI) is a formal written query a contractor raises with the client’s design team or superintendent to resolve a gap, ambiguity or discrepancy in the drawings or specification before pricing or building the affected work.
Read moreAn extension of time (EOT) is a contractual adjustment to the date for practical completion, granted when a qualifying delay — one outside the contractor’s control — pushes back the program.
Read moreSecurity of Payment (SOP) legislation gives contractors, subcontractors and suppliers in every Australian state and territory a statutory right to progress payments for work carried out, with strict response timeframes and a fast adjudication process if a payment claim is disputed.
Read moreAdjudication is the fast, statutory dispute resolution process under Australia’s Security of Payment legislation, where an independent adjudicator determines how much is payable on a disputed construction payment claim, usually within weeks rather than months.
Read moreA contractor holds the head contract directly with the client and carries overall responsibility for the works, while a subcontractor is engaged by the contractor to carry out a specific trade or portion of the work.
Read moreA head contractor is the party that holds the primary contract directly with the client for a construction project and carries overall responsibility for delivering the works, including engaging and coordinating any subcontractors.
Read moreNovation is the legal process of transferring an existing contract from one party to another, with the consent of all parties, so the new party takes on the original rights and obligations as if it had signed the contract from the start.
Read moreDesign and construct (D&C) is a project delivery method where a single contractor takes responsibility for both designing and building the works under one contract, giving the client a single point of accountability for the finished project.
Read moreBuildability is how easily and efficiently a design can actually be constructed, given realistic materials, labour, plant, sequencing and site conditions — not just whether it satisfies the drawings and specification on paper.
Read moreA takeoff (or quantity takeoff) is the process of measuring the quantities of materials, labour and work items directly from construction drawings, before those quantities are priced.
Read moreA rate build-up is the detailed calculation behind a single unit rate in an estimate or Bill of Quantities — adding together labour, materials, plant, subcontract cost, overheads and margin to arrive at a defensible price per unit.
Read morePreliminaries & General (P&G) is the combined heading commonly used in Australian tenders and Bills of Quantities for the project-wide costs of running a site — the same site overhead costs usually called “preliminaries,” priced together under one heading or as a single percentage.
Read moreThe National Construction Code (NCC) is Australia’s uniform set of technical provisions for the design, construction, performance and plumbing of buildings, produced by the Australian Building Codes Board; the Building Code of Australia (BCA) is the older name still widely used for its building volumes.
Read moreDial Before You Dig (DBYD) is Australia’s free national referral service that tells anyone planning to excavate where registered underground pipes and cables are located near their job, so digging can be planned safely around them.
Read moreAS 4000-1997 is a widely used Australian Standard general conditions of contract for construction, setting out the rights, obligations and processes — including variations, extensions of time, payment and dispute resolution — between a principal and a contractor.
Read moreA backcharge is a cost one contracting party incurs because of another party’s defective, incomplete or delayed work, then deducts from the money owed to the party responsible.
Read moreA retention bond is an unconditional undertaking from a bank or surety, provided in place of cash retention, that lets the client call on funds up to an agreed amount if the contractor fails to complete the works or fix defects.
Read moreFinal completion is the contractual milestone reached once a contractor has rectified all defects identified during the defects liability period, closing out the contract and releasing the balance of retention.
Read moreGross Floor Area (GFA) is the total floor area of a building measured to the outside face of the external walls, used for planning approvals and early-stage cost benchmarking.
Read moreNet Lettable Area (NLA) is the actual floor space a tenant can occupy and pay rent on, excluding common areas, structural walls, cores and services.
Read moreOn-costs are the additional employment expenses on top of a worker’s base wage — superannuation, workers compensation, leave, allowances and payroll tax — that must be built into an all-in labour rate.
Read moreA cost plan is an evolving estimate of a project’s total cost, prepared and refined at each design stage to keep the project within budget before it goes to tender.
Read moreAn elemental estimate prices a building by its major elements — substructure, superstructure, finishes and services — usually as a rate per square metre of gross floor area, and is used early in design for benchmarking rather than firm pricing.
Read moreA first-principles estimate builds a price up from the actual labour, material, plant and on-cost components needed to complete each item of work, rather than applying a benchmark rate, giving the most accurate and defensible price for a tender.
Read moreThe price for one unit of a measured item — such as per square metre, cubic metre, lineal metre, tonne or each — that is multiplied by the measured quantity to produce a line total in an estimate or bill of quantities.
Read moreA unit rate that bundles every cost of doing the work — labour with on-costs, materials with wastage, plant, and often overhead and margin — into a single figure per unit.
Read moreThe standard time, in labour hours, that it takes to complete one unit of a task — used to convert a measured quantity into labour hours and, from there, into labour cost.
Read moreThe extra quantity of material — expressed as a percentage — added to a takeoff to cover offcuts, cutting losses, breakage and spoilage, so what gets ordered matches what the job actually uses.
Read moreThe increase in material, labour or plant costs over the time between pricing a job and doing the work — allowed for on longer projects so a fixed price is not eroded by rising costs.
Read moreA contract clause that adjusts the contract price up or down for defined changes in the cost of labour or materials during the works, shifting escalation risk from contractor to principal.
Read moreA bank guarantee is a bank’s written undertaking to pay a nominated sum to the principal on demand if the contractor fails to meet its contract obligations — commonly used as security in place of cash retention.
Read moreA performance bond is a form of security — issued by a bank or a surety on the contractor’s behalf — that guarantees the contractor will perform its contract obligations, giving the principal a financial remedy if it fails to do so.
Read moreA tender addendum is a formal document issued by the principal during a tender period that changes or clarifies the tender documents — such as scope, drawings or answers to RFIs — which every tenderer must take into account and price.
Read moreA quantity surveyor is a construction professional who measures and manages the costs of building work, preparing Bills of Quantities, cost plans, progress valuations and final accounts.
Read moreMake good is the work of restoring a building or space to an agreed condition — most commonly a tenant reinstating a leased space at the end of a lease, or repairing existing work disturbed by new construction.
Read moreA cash flow forecast is a projection of when money will be spent and received across a project’s timeline, often shown as an S-curve, used to plan progress claims and manage working capital.
Read moreAn itemised list of every material and the quantity of each needed to complete a job — the supply-side list used to order stock, distinct from a Bill of Quantities, which prices measured work for a client.
Read moreDetailed drawings prepared by a contractor, fabricator or supplier showing exactly how an element will be made and installed, submitted to the designer for approval before fabrication begins.
Read moreDrawings updated at the end of a project to show exactly how the works were actually constructed — including every variation from the original design — and handed over to the client for records and future maintenance.
Read moreA Development Application (DA) is a formal application lodged with a local council in New South Wales for permission to carry out development — such as building work, a change of land use, or subdivision — assessed against the council’s planning controls.
Read moreA Construction Certificate (CC) is a certificate confirming that detailed building plans comply with the Building Code of Australia and any conditions of a development consent, required in New South Wales before construction work can start.
Read moreAn Occupation Certificate (OC) is a certificate, issued in New South Wales, authorising a new or altered building to be lawfully occupied or used, granted once final inspections confirm the completed work meets the required standards.
Read moreProlongation costs are the additional time-related costs a contractor incurs when a project is delayed for a reason entitling an extension of time — extended site establishment, supervision, plant hire and other preliminaries that keep running for every extra week on site.
Read moreA pay-when-paid clause is a subcontract term that makes payment to a subcontractor conditional on the head contractor first being paid by the client. These clauses are void and unenforceable under Australian Security of Payment legislation.
Read moreOverheads are the ongoing costs of running a construction business that are not tied to any single job — office and admin, insurance, software, vehicles and marketing — recovered by adding a margin or percentage across all jobs.
Read moreA guaranteed maximum price (GMP) is a contract in which the contractor sets a ceiling price the client will not have to exceed, with actual costs tracked openly up to that cap and any savings below it typically shared between the parties.
Read moreA schedule of values is a breakdown of the total contract sum into priced items or stages of work, used as the basis for assessing and paying progress claims as the project proceeds.
Read moreA punch list is the list of incomplete or defective items still to be fixed before, or right at, practical completion — walked and agreed with the client or superintendent so the job can be formally signed off.
Read moreHard costs are the physical construction costs of a project — labour, materials and plant — while soft costs are the non-construction costs of delivering it, such as design, approvals, insurances, finance and project management.
Read moreThe critical path is the longest sequence of dependent tasks in a construction program, and it sets the shortest possible time the whole project can take — delaying any task on it delays the whole project.
Read moreA construction program is the planned timeline of construction activities — their sequence, durations and dependencies, usually shown as a Gantt chart — used to plan, sequence and track a project from start to practical completion.
Read moreMobilisation is the work and cost of getting set up to start on site — moving in plant and equipment, installing temporary facilities, and completing site establishment and inductions — usually priced as a distinct preliminaries item and often claimed as an early progress payment.
Read moreFloat is the amount of time an activity in a construction program can be delayed without pushing out the overall project finish date (total float) or the start of the next activity (free float). Activities on the critical path have zero float — any delay to them delays the whole job.
Read moreValue engineering is a structured review of a design aimed at reducing cost or improving value without sacrificing the function or quality the client actually needs — usually by considering alternative materials, methods or specifications. It’s most often triggered when a tender comes in over budget.
Read moreCut and fill is the earthworks process of balancing material excavated (cut) from higher ground against material placed (fill) in lower ground, so a site reaches the levels shown on the design.
Read moreA reduced level (RL) is the height of a point on a site expressed relative to a fixed datum, so every level shown on a set of drawings can be compared on the same vertical scale.
Read moreSet-out is the process of transferring a building’s design position and levels from the drawings onto the actual ground, using survey instruments and fixed control points, so construction starts in exactly the right place.
Read moreSpoil is the soil, rock, clay or rubble excavated from a site that is surplus to the job’s cut-and-fill needs, so it must be carted away and disposed of, typically classified as clean or contaminated for cost and compliance purposes.
Read moreShoring is the temporary support system — piles, sheets, walings, props or anchors — installed to hold back the face of an excavation or brace an existing structure so it cannot collapse or move while work is carried out nearby.
Read moreA dilapidation report is a pre-construction survey — usually photographic and written — that records the existing condition of a neighbouring or adjoining structure before work begins, so any damage caused during construction can be identified and resolved fairly.
Read moreAn Inspection and Test Plan (ITP) is a quality control document that lists, in sequence, every inspection and test a work activity needs to demonstrate it meets the drawings, specification and relevant standards, together with who has to check and sign off each point.
Read moreA hold point is a mandatory stop built into an Inspection and Test Plan where work cannot proceed until a nominated party has inspected and approved it — as distinct from a witness point, which allows work to continue if that party doesn’t attend after notice.
Read moreA Safe Work Method Statement (SWMS) is a document required under Australian work health and safety (WHS) law before prescribed high-risk construction work starts, setting out the hazards involved and the control measures used to manage them.
Read morePlant and equipment are the machinery and powered tools used to physically carry out construction work — excavators, cranes, scaffolding and elevated work platforms among them — priced either as a hire rate per hour or day, or as an owned-plant cost, and built into an estimate’s unit rates.
Read moreContract works insurance covers the works under construction — and typically the materials and plant on site, and sometimes an existing structure being renovated — against accidental physical loss or damage while a project is underway.
Read moreHome warranty insurance is a statutory insurance scheme for residential building work that protects the homeowner, not the builder, if the builder dies, disappears, becomes insolvent or cannot rectify defective work, and it goes by a different name in each Australian state.
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