Hi there all, Jacob Austin here, and welcome to episode 168 of the Subcontractors Blueprint, the show where subcontractors learn how to ensure profitability, improve cash flow and grow their business.
Today we're continuing our Big Mistakes mini-series, and in episode two of this series we're covering 10 mistakes that lock in a loss from the moment you pick up the tender. Starting with the big one, pricing the drawings instead of the subcontract. So, let's dig in.
Right, last time in the mistake series we started looking at working without a signed subcontract, but this is one step before that, with the actual estimate. Because plenty of losses aren't made by subcontractors working on site, they're made at a desk weeks before anybody's picked up any kind of a tool.
We know margins are thin in this industry, all the way up and down the chain. Figures from the Construction Index, cited by the law firm Freeths, put average profit margins of the UK's top 100 main contractors at 1.87% in 2024 and 2.4% in 2025. Pretty dismal numbers.
When the business above you is working on around 2 pence in the pound, guess where it looks to protect that margin? Your price, your terms, your attendances.
Industry commenters writing about why construction firms fail keep going back to the same point. The lowest price often wins the tender. And then the work gets done on minimal margins. So underpricing looks like it pays off. But it's as endemic in the industry as late payment is. Couple the two things together and construction had more insolvencies than any other sector in England and Wales last year. 3,931 companies, according to the Insolvency Service's figures.
Back in 2012, a survey of 278 specialist contractors found 41% had been asked to cut their costs after terms were already agreed. That's an old survey, but I'm sure even if you've tendered recently, you'll know how that phone call goes.
But there is a newer sign that subcontractors are starting to push back. A 2026 survey of 127 subcontractors by the payment software firm Pay Apps found 68% had raised their rates or added a risk margin because of how slow or unreliable payment was. So pricing the terms, not just the work, is entirely possible and it's already happening. This episode is about doing it deliberately.
That starts with being clear about what you're actually pricing. Most estimators will price the drawing and the specification. Measure it, rate it, add overheads and profit. Job done.
But the contract you're signing up to is bigger than just the drawings. It's the subcontract conditions. It's the schedule of amendments. The main contract obligations pass down to you, the programme, the payment terms, the retention, the site rules and the contractor's own health and safety and environmental policies. Every one of those has a cost to it, and if it's not in your price, it's coming out of your margin.
Here's a legal point that can catch people out. If you agree to do a package for a lump sum, the courts have long since decided that you're generally promising to do everything necessary to deliver it, not just the things that happen to be on a drawing.
The classic case goes all the way back to 1858, Williams against Fitzmaurice, in which a builder agreed lump sum to build a house finished and fit to live in. But the specification didn't mention the floorboards, and the builder decided they weren't going to lay them without being paid extra. But the court said floorboards were plainly needed to finish the house, so they were in the price anyway.
Another old case, Sharpe against the San Paulo Railway, made the same point on a bigger scale. A contractor agreed a lump sum to build a railway line, and then the engineer's plans underestimated the excavation significantly. But the contractor still had to finish for the lump sum.
Now, there is a point to be made. A genuine change to the design is still a variation and you should be paid for it, but this isn't about that. It's about the work that was always needed to deliver what's drawn and what's specified. That is usually in your price, whether you've priced it in or you haven't.
Two common clauses make that situation worse. The Electrical Contractors Association publishes a guide to onerous terms and it flags both of them. The first makes drawings and specifications part of your contract even if they weren't attached, with any discrepancies resolved by the main contractor at your cost. The second says you're deemed to know what the main contract says, and you must perform the main contractor's obligations, even though you've never seen it.
There's another thing to check before you price a line. Who carries risk on the quantities? If the main contractor sends you a bill of quantities and then the subcontract makes that bill a contract document with a stated method of measurement and a mechanism for correcting errors, then a mistake in the quantities is usually corrected and valued. If you're pricing a lump sum from drawings and specification, your take-off is your risk. Get a quantity wrong and nobody corrects it for you. And watch for quantities sent with the inquiry marked for guidance only. That label usually means that the numbers are theirs but the risk is yours.
So when you price the drawings you're pricing maybe half of the risk. The rest is hidden away in the paperwork. So on to the 10 mistakes.
Mistake one. Pricing the drawings without reading the subcontract. This is the headline mistake so plenty to say on this. Most subcontract inquiries arrive as a drawing pack and a specification and a line at the bottom saying subcontract terms are to follow or terms are asked per our standard conditions. The estimator then prices whatever they can measure and nobody reads the terms until the job's won and by then the price is fixed.
But here's what's wrong with that picture.
The terms decide how long you wait for your money, how much is held back in retention for how long, what the main contractor can charge you for, what you have to provide on site and what the contractor is going to provide for you, how many visits you'll make, how long you're on the hook for defects and what happens if the job runs late. None of that is on the drawings. All of it has a price, and some of it is a significant price.
And here's the misconception that you need to banish forever. If it's not on the drawings, it's an extra. Sometimes it is, but, going back to our very old case of 1858, if it was always needed to deliver the package, the Williams against Fitzmaurice case says you're always going to have to do it. The time to argue about what's included when you tender through your scope and your qualifications is before you start, not on site three months in.
So treat the subcontract terms as their own tender document in their own right. If they're not in the inquiry, ask for them before you price. If the contractor won't send them, then price on a named standard form, unamended and say so in your tender. That at least gives you a baseline. The amendment that they later bring to you becomes a change to that baseline, and you can price that change.
If the contractor genuinely won't send you the terms, you've got to question who you're going to end up working with. Are they trying to pull some clever stunt up front? By pricing a standard form, they'll probably accuse you of the same, but you've got quite a straightforward answer to that, in that they've refused to send you the terms, So you've assumed that something standard for the industry would apply. That's quite reasonable. What's not reasonable is not sending the terms in the first place.
Your second mistake would be tendering that lump sum with no qualifications and no exclusions. A bare lump sum with no assumptions, it just invites the contractor to read everything into it. Qualifications and clarifications are how you draw the boundary. down what you've included, what you've excluded, and what you've assumed. But you've got to remember that qualifications only protect you if they end up in the subcontract. A tender letter that never makes it into the contract document is just a letter. It might tell a nice story about how I built this job on time, but it's doing nothing for you if it's not a contract document.
Mistake three is under allowing for attendances such as access and site obligations. This will cost you money week after week if you don't get it right. Attendances are the things one party provides so that the other can do its work. Things such as access equipment, hoisting and unloading, storage, waste removal, welfare, temporary power and lighting.
The question at the start of every subcontract is which one of those the contractor provides and which one you provide. If the subcontract is silent or vague, it's you. So you need to read your subcontract and the site rules, so with questions like these, who provides the scaffold towers? Who's providing a MEWP for that difficult to access part? How long does it need to be provided for? Who's unloading their deliveries? Is there a crane or a hoist? Is there a booking system for that crane or hoist? Is there a charge per lift? Are you clearing your own waste to a sack point? Or are you clearing it away from site altogether? Are there any delivery windows or working hour limits that stop you getting materials to your work face when you need them? None of these things are going to be seen on a drawing, but all of them will cost you money. If you've got men standing because you can't get your materials to your workers it's going to hurt you a lot. If you miss other obligations and then you rely on the contracts to provide them then they're going to turn up later as contra charges or you provide them yourself and you've got no way of recovering the money.
The fix to this is simple and it's really boring. The contractor either provides you with an attendance schedule telling you what to build into your price, or you do it yourself, or at least qualify your bid. Tell them exactly what you've allowed for, and tell them what they need to provide for your price to work. Every sensible item needed to complete the project either needs to be marked, provided by us, or provided by you, the contractor. And you send that in with your price. If the contractor wants to change it, it's a change to your price and not just a favour.
Mistake four. Not pricing the cost of the money terms. This is one that again, estimators never price at all. There are three money terms that are going to change what your price is really worth, without going near a single rate.
Firstly, the payment cycle. Let's say the payment terms where the application date, the due date and the final date for payment stack up to roughly 90 days. 90 days is three months worth of wages and materials that you're funding before you see a single penny back in your pocket. And don't forget if you start at the beginning of the month, then you've worked a full 30 days before you've even applied for the money. So in reality, some of that work you've been paying for for 120 days before you get paid for it. And that's if you're paid on time, which, let's face it, a lot of subcontractors aren't. Again, there's a cost to that money.
The second thing is retention. To see 5% held back is pretty common, but you also need to watch for the release dates being tied to the main contract's completion or defects period instead of your own. That can leave your money sat with somebody else for well over a year after you've left sight. That is a form of pay when paid clause, so on the one hand you need to challenge that, but on the other the government has announced plans to ban cash retention, but there's still no date for that to come to fruition. Until that happens, you have to price the effects of not having 5% of your price from the day that you start until the day you can get paid it.
The third thing is the discount. Some subcontractors still include a main contractor's discount, typically 2.5% off of every payment. It was originally meant to encourage prompt payment. But quite often the main contractor will factor in clauses that allow them to take the discount regardless even when they pay late. 2.5% can be a decent chunk of your margin. If you've only priced in a 10% margin, that's a quarter of your profit.
As a quick, cheeky fix for the discount. If the subcontract has a discount specified, then gross up your price so that after the deduction you're getting paid the amount that you want. To do that you'd be dividing your net price by 0.975. Quick bit of arithmetic and you've sidestepped a discount.
But all of those three issues combine to make one fairly sizable risk and fairly sizable cost contribution that you can't perceive from the drawings. So this is one to add to the bottom line of every estimate, the cost of the terms. Finance on the payment cycle, finance and risk on the retention, loss of revenue on the discount. On a small job, those three things might come up to something fairly small. on a big package with long terms, it can be the difference between a profit and a loss for you.
Mistake five. Pricing to win it and then planning to make it back on variations. It's tempting, but it's a gamble, and it's one that often doesn't pay off. For one, there might not be any changes. You sharpen the price, assuming the design's incomplete, and the changes will come. But those changes have to be instructed, valued and paid, and every one of those is going to take your time, and you simply might not be able to value them in a way that earns you extra margin. Following the JCT's valuation rules, changes would be valued at your sharpened rates. And of course, if the changes don't come at all, you've simply bought the job at a cut price.
So you've got to price the job in front of you, and then treat the variations as a bonus, not a business plan.
Mistake six is giving away a discount after tender, with nothing in return. The call comes, and you're close, but you need to find 5%. But if you knock 5% off, and you change nothing else, you've cut your margin, or potentially wiped it out altogether, with every pound you've just given away coming out of your pocket. Whereas every pound you give away should come with something back, be it a scope item removed, not likely, or better terms, be that payment terms, lower retention or some attendance thrown in that they can get for a cheaper price than you. If the contractor wants a lower price, you need to have a smaller risk to go with it. Bear in mind as well that whatever comes out has to be written into the subcontract or you're just reducing your price with no documented evidence that anything is changed.
Mistake seven. Making no allowance for programme risk. Your price assumes a flow of work. One continuous run. One mobilisation. The programme shows three phases with gaps in between them and work areas handed over piecemeal. Every return visit means a remobilisation, setting up again, and labour standing whilst other trades finish.
The contractor should be providing you with a programme at tender stage so that you can read it, price it in, count the visits, assess the non-productive time, and tailor your price to the site accordingly. If there's no programme, state the number of visits you've allowed for, and the length of each one. Even if the job turns from 3 to 5 visits, the two extra are chargeable and you can point to the facts to get your hands on the remobilisation money, rather than it just being a cost that you swallow.
Mistake eight. Not pricing design responsibility or particularly the insurance that goes with it. If the package includes any design, coordination drawings, fixing calcs or a performance spec that you need to meet, then that's design. Design takes time and it may need professional indemnity insurance, more than likely. Since the Building Safety Act, claims on new dwellings can be brought for 15 years. If design is in the scope, it's deemed in your price. Make sure you deal with it properly.
Mistake nine is not checking the main contractor before you bid. A great price for a contractor who routinely pays late, pays short or even goes bust isn't a great price. Before you spend a week on an estimate, check their accounts, check their payment record on the government's Check Payment Practices Service that shows you how long large businesses are taking to pay their suppliers. If their numbers worry you. Either price the risk in or walk away from it altogether. But do it with your eyes open. With the facts.
Mistake ten is never comparing actual cost against your tender. If you never look back then you make the mistake on the next 10, 20, however many jobs. At the end of every package you complete you need to compare what you priced against what it actually cost. That means labour, attendances, visits, finance, materials, the lot. Where you're wrong, you need to update your estimating rates. Your last job with the detailed cost data you've now got is the best estimating data that you're ever going to have and it's free. You just need to get your hands on it.
It doesn't need to be complicated either. Half an hour with your estimator getting a download from your site lead with a tender in one hand and a cost report in the other answering straightforward questions. What did we miss? What did we underprice? What will we do differently on the next one?
So here's how you protect yourself. Pricing the contract, not just the drawings. In five steps.
Step one is get the full document before you start pricing. That means subcontract conditions, the schedule of amendments, any main contract documents that you're going to be bound by, the programme, the site rules and logistics plan, and the details on the terms. If they won't send you that, then price on a named standard form, such as a JCT, and say that's what you've done.
Step two, do a second take off on the terms. And I mean go through the documents with questions in mind. What does this cost me? Be that the discount, the retention, the payment cycle, what risks are being shipped off to you as if you'd price them into the job from the start. Each thing needs to be given a number and factor it into your price.
Step three, write proper qualifications that mean something to the job, not some generic guff that you put on the bottom of every estimate. We've excluded builder's work in connection. And five other things because you lost some money on them ten years ago. Now, I mean specific clarifications and qualifications. This is how we're going to deliver this job. You're going to provide the scaffold. We need it to this programme at no cost to us. We've price the following attendances. You need to provide these other items. Crucially as well, when the subcontract arrives, you need to check that those qualifications made it into there. If they didn't, they don't exist.
Step four. Decide before the phone rings how much you're willing to give away to win the job. There's always a potential bit of wiggle room, but set yourself a boundary. Write down your walk away number for each tender. Decide it up front so you're not deciding it live and under pressure from the main contractor when you're seeing all those big turnover numbers flashing before your eyes. Decide on your terms and stick to it.
Finally, learn from your tender. Compare actual cost against your tender price and feedback what you learn into your rates so that your next tender is better.
And there we have it. Let's wrap up. You're not just pricing drawings, you're pricing a whole contract. You need to read what that means to you before you price it. And when you price it, you price the money terms, the payment cycle, the retention, you price the attendances and the ones you're not pricing in, you clearly mark as an exclusion and make sure whatever you price when you receive a subcontract it reflects that detail in there. If it doesn't you might as well not have written it.
I hope that helps. We'll be carrying on our mistake series with another stage of the job and another set of 10 mistakes that costs subcontractors money next week.
My mission with this podcast is to help the million SME contractors working out there in our industry. If you've taken some value away from today's episode, then I really need your help to share the show and pass that value on to somebody else who'd benefit from hearing it, so I can help as many people as possible.
And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.subcontractorsblueprint.uk and we're also on all your favourite socials, Again, that subcontractor's blueprint. And remember, miss the contract detail and the commercial risk falls on you. Thanks all. I've been Jacob Austin, and you've been awesome.
