How to tell whether
you are underpricing.
You will not find it in the jobs that went wrong. It is in the ones that went fine and returned less than they should have. A test you can run on last year in an afternoon.
Published ·5 min read·Written by Unibuild
Underpricing does not appear in the jobs that went wrong. It appears in the ones that went exactly as planned and returned less than they should have, which generate no incident and no conversation. The test is to compare tendered against actual on jobs that ran cleanly, and to check whether your overhead recovery was ever in the price.
Why it stays invisible for years
A job that overruns is an event. There is a reason, somebody is annoyed, it gets discussed at the next meeting, and the business learns something even if the lesson is wrong.
A job priced four per cent too thin does none of that. It runs to programme, the client is content, nobody rings anybody, and it returns a bit less than expected. The bit less is attributed to the weather, or a slow month, or that particular client being awkward, and the pricing is never suspected because nothing went wrong.
Repeat that across a year and the pattern is a business that is busy, well regarded, apparently competent, and not making money. Which is precisely the shape most struggling contractors are in, and why the diagnosis so often lands on cost control when the problem was upstream of the job entirely.
Nothing goes wrong on an underpriced job. That is the whole difficulty: the failure mode produces no symptoms, only a smaller number at the end of the year.
Four signs that show up before the accounts do
- You win most of what you price. A high conversion rate feels like strength and is usually the first symptom. If you are winning well over half of competitive tenders, you are the cheapest more often than is likely to be accidental.
- The jobs that make money are the small ones. A classic signature of prelims priced as a percentage rather than by time: the bigger the job, the more time-related cost it carries and the less of it you priced.
- Variations are where the margin comes from. If the base scope reliably returns nothing and the job is rescued by extras, the base scope is priced below cost and you are relying on the client changing their mind to get paid.
- Everyone is busy and nothing is accumulating. Turnover healthy, work booked, cash never quite there. Worth separating from the timing problem in the construction cash gap, because they feel identical and have different fixes.
The test, which takes an afternoon
Against your own numbers rather than any benchmark, because there is no credible published figure for what a contractor of your trade and size should be making, and anchoring to an invented one is worse than not testing at all.
- Pick six jobs from last year that ran cleanly. No disputes, no major variations, nothing memorable. Those are the honest sample, because a job with a story attached tells you about the story rather than about the price.
- For each, put the tendered cost next to the actual cost. Labour, plant, materials and subcontract, as they turned out. If assembling that takes more than a few minutes a job, note how long it took, because that is a separate and equally important finding.
- Work out the recovery on each: actual revenue less actual cost. Not the tendered margin. What the job really returned.
- Compare that against your overhead recovery percentage. Last year's fixed overhead divided by last year's turnover, from how to price a construction job. If the average recovery across the six is below that percentage, the business is losing money on work that is going well.
- Then look at the spread rather than the average. Six jobs all returning a similar thin figure is a pricing problem. Five good and one terrible is a job problem, and a different conversation.
Where the money actually leaked
When the test shows a gap, it is almost always in one of four places, and they are worth checking in this order because that is roughly how often each is the answer.
Labour output. The rate assumed a gang would achieve something they do not achieve on a real site with real access. This is the commonest single cause and the easiest to correct, because you now have actual hours against actual quantities from step two.
Preliminaries. Priced as a percentage, and therefore under-priced on anything long. Covered in preliminaries, the cost most firms forget to price.
Overhead never in the number. The most consequential and the least visible, because it makes every job look fine individually while the company does not work.
Materials bought at a different price from the one quoted. Particularly where the quote sat for weeks before it was accepted, which is the subject of materials went up after you quoted.
Putting the price up
The part everybody dreads, so worth being practical rather than encouraging.
You will lose some work, and that is the mechanism working rather than failing. Work you lose at a correct price is work that would have lost money. A firm at ninety per cent utilisation on underpriced work is worse off than the same firm at seventy per cent on properly priced work, and the second one has time to tender better.
Two things make it easier. Move on the next tender rather than announcing anything, because a price is a price and nobody is owed an explanation. And move on the segment where the test showed the biggest gap rather than across the board, since the evidence is specific and so should the correction be.
Step two is the whole test and it is the step that defeats most firms, because tendered against actual means reconciling a priced schedule with hours, invoices, plant and subcontract that live in four places. In Unibuild the priced sections of a quotation carry through to the works schedule with their tendered values, hours arrive against the job from clock-ins at dated cost rates, orders become committed cost when issued rather than when invoiced, and the subcontract exposure report totals orders, invoices and payments across the ledger. That turns an afternoon of assembly into a comparison. What it will not do is tell you what your margin should be.
Where to start, on Monday
Two jobs, not six, to begin with. Pick the two that went most smoothly last year and put tendered cost next to actual cost. If you cannot produce that in an hour, that is the first finding and it is about your records rather than your prices.
If you can, and the recovery on both is below your overhead percentage, you have your answer and you did not need the other four.
How do I know if I am underpricing my building work?+
Why does underpricing go unnoticed for years?+
Is a high tender win rate a good sign?+
Where does the money usually leak on an underpriced job?+
Will I lose work if I put my prices up?+
More from Insights.
The contractor above you has gone into administrationWhat to do in the first seven days, where you rank, and the three things worth securing before anybody tells you to stop.Read it →
Warning signs the firm above you is in troubleThe accounts tell you eighteen months late. What tells you now is behaviour: valuations shaved without explanation, payment slipping a week at a time, and the commercial team turning over.Read it →
Getting gross payment status, and keeping itThree tests, and the one that catches firms out is the compliance test, which now looks at VAT as well. What qualifying takes, and what a single late return costs you.Read it →
Verifying a subcontractor with HMRCThe step that decides the rate you deduct at, and the one firms do after paying rather than before. What verification returns, how long it lasts, and who carries the cost of getting it wrong.Read it →
What an employee actually costs youSalary is about four fifths of it. Employer National Insurance at 15% above a £5,000 threshold, the pension, and the on-costs of putting somebody on a site make up the rest.Read it →
Subcontractor or employee, and why HMRC may disagreePaying somebody through CIS does not make them self-employed. The tests that decide it, the arrangements that fail them, and the declaration you sign every month saying you have considered it.Read it →
Why you cannot find reliable subbiesIt is treated as a hiring problem and it is a retention problem. The firms that get the good trades are the ones that are straightforward to work for, and most of that is commercial rather than social.Read it →
Knowing what plant you own and where it isThe losses are quiet: kit that walks between sites, kit hired because nobody could find the one you have, and kit written off that is still in a container. What a register has to do to stop it.Read it →
Off-hire, and the charges that keep runningHire runs until the item is off-hired, not until you finish with it. A preventable loss that every contractor recognises and almost nobody has a process for.Read it →
Gateway 2, and what it does to a programmeApproval has to be granted before construction starts, and the wait has improved sharply: a median of 22 weeks at June 2026 against 43 a year earlier. What that means if you are not the applicant.Read it →
Bidding for public sector work for the first timeThe Procurement Act 2023 changed how this works in February 2025, and one requirement is absolute: register on the Central Digital Platform or you cannot be awarded a contract at all.Read it →
Where the office hours actually goNot in the work. In assembling positions from four places, retyping what site already recorded, and chasing paperwork that exists but cannot be found. How to measure your own before deciding anything.Read it →
How to price a construction job without guessingA method rather than a feeling: measure, build the rate from labour, plant and materials, add the site costs that carry the job, recover overhead, then decide margin. The order matters and the last two steps are where firms lose money.Read it →Day rate or fixed price, and when each one costs youNot a preference. A decision about who carries the risk of the unknown, and there is a right answer for most jobs once you are honest about what you do not know.Read it →Materials went up after you quotedThe average tells you nothing. Structural steel rose 13.1% in the year to May 2026 while cement fell 5.0%, and a quote is only exposed to what it is built from. What protects a price, and what does not.Read it →Preliminaries, the cost most firms forget to priceEverything that makes the job possible and appears on no drawing: supervision, welfare, access, plant standing, insurance, and the time before and after. Why it gets under-priced and how to stop.Read it →Getting on a main contractor's approved listThe application is the easy half. What decides it is the evidence pack behind it, and what gets a firm quietly dropped afterwards is rarely the work.Read it →SSIP, CHAS, Constructionline and what replaced PAS 91An acronym map with the money attached. Which schemes are health and safety only, which are full pre-qualification, what mutual recognition actually saves you, and why PAS 91 is no longer the answer.Read it →
What counts as construction work under CISThe included list is wider than most firms assume and the excluded list catches out exactly the trades that read it. Plus the mixed contract rule, which decides more cases than either list.Read it →CIS monthly returns, the date and the penaltiesThe nineteenth, every month, whether or not you paid anybody. What the penalty ladder actually looks like, and the declaration on the return that carries more weight than the figures.Read it →End user statements, and what they switch offIt has to be in writing, it comes from your customer rather than from you, and without it the reverse charge applies by default. What the statement says and where it belongs.Read it →
The certificates that expire without anybody noticingInsurance, cards, plant inspections, training and first aid all run out on different dates, and nothing about your file changes on the day one of them does. What has to watch them.Read it →When an HSE inspector turns up on siteWhat they can do, what they ask to see and in what order, what a Notification of Contravention means, and what the visit can cost you at £188 an hour.Read it →RIDDOR, what has to be reported and by whenThree different clocks run on three different categories, and the one firms miss is the fifteen days, which counts from the accident rather than from the day you realised.Read it →When a job becomes notifiable, and who tells the HSETwo thresholds, either of which triggers it, and a duty that sits with the client rather than with you. How to work out whether your job crosses them.Read it →Which CSCS card, and who actually checks itSeven colours, different qualifications behind each, and a five year clock on most of them. What each card is for, and why it is not a legal requirement but still stops you at the gate.Read it →Why WhatsApp fails as a site recordIt is the system most sites actually run on, and it works right up until somebody asks a question about March. Six specific failures, and the one that arrives when a person leaves.Read it →Where spreadsheet job costing breaksNot when it gets complicated. When two people open it, when committed cost is not in it, and when the true position is a week old by the time anybody has assembled it.Read it →Choosing construction management software, and what to actually compareEvery product demos well. A buyer's checklist written to be useful even if you buy from somebody else, including the five questions vendors answer badly.Read it →Xero for contractors, and where the accounts package stopsIt handles CIS properly and it is a good ledger. What it is not built to hold is the job: the measured schedule, the valuation, the retention and the cost you have committed but not yet been invoiced for.Read it →Document control, and the revision everybody was working toBuilding to a superseded drawing is expensive, common, and almost never anybody being careless. What has to be true for the right revision to reach the person holding the tool.Read it →An application for payment that does not come back rejectedFour reasons account for most rejections, and none of them is the price. What the document has to contain, what has to sit behind it, and the date that matters more than the total.Read it →Getting paid for variations you were told to get on withThe entitlement is rarely the problem. The evidence is. What stands up when the instruction was verbal, and the one email that changes the argument.Read it →When a missing notice hands you the moneyAn adjudication that asks nothing about what the work was worth, only whether the notices were served. What it wins, and the second adjudication that usually follows it.Read it →Stopping work for non-payment, without breaching your contractA statutory right with narrow conditions and real leverage. What has to be true before you can use it, what the notice must say, and what walking off without one costs.Read it →Charging interest on a late payment, and the sums nobody claimsStatutory interest runs at eight per cent above base, and a fixed compensation sum sits on top of it that almost nobody asks for. Both are automatic entitlements rather than favours.Read it →What the Construction Act actually gives youSix rights that apply whether or not your contract mentions them, and whether or not anything was ever signed. What each one is, and where it stops.Read it →Vetting a subcontractor before you instruct themNine checks, what each one is actually protecting you from, and the two that firms skip and then discover matter. Most of it is twenty minutes and free.Read it →Credit checking the firm above you, free, in twenty minutesEverything you need is public and none of it costs anything. Filing history, charges, director record, county court judgments, and the payment data large firms are now compelled to publish, including what they do with retention.Read it →Quote or estimate, and which one binds youOne is an offer that becomes a fixed price the moment it is accepted. The other is an informed guess. Almost nobody says which they are sending, and the word at the top of the page is not what decides it.Read it →When you become the principal contractor without being toldThe duty attaches to a role, not to the size of the firm, and a second contractor arriving on site is enough to trigger it. What lands on you, and what happens when the client never appointed anybody.Read it →What construction software actually costsThe monthly figure is the part everyone compares and the smallest part of the bill. Setup, migration, the annual uplift, and the licences you ration because they are charged per person.Read it →The VAT reverse charge, and who accounts for the VATFive years in and it still catches firms out on every second invoice. When it applies, when it does not, the written statement that switches it off, and the wording your invoice has to carry.Read it →Reclaiming CIS deductions, and the money sitting with HMRCA limited company gets its deductions back through payroll rather than through its Corporation Tax return, and only if somebody files the right submission every month. Where the money goes, and how to stop it piling up.Read it →The gap between doing the work and having the moneyWages go out weekly, materials at thirty days, and the money comes back at sixty. Retention, CIS and the reverse charge each take a slice on the way. Why a job that made a profit can still run a firm out of cash.Read it →When the contractor above you will not payThe remedies run in a fixed order and each one costs more than the last. What to do first, what every step is worth, and the rung most disputes never get past.Read it →Pay less notices, and the timetable behind themFour dates govern every interim payment in UK construction, and statute sets them rather than goodwill. What each one is, how to work them out on your own job, and what a late notice costs the party that served it.Read it →Pay when paid, and why it does not bind youMaking your money conditional on somebody else being paid has been ineffective in UK construction since 1998. The clause is still written into contracts, still quoted down the phone, and still works on firms that do not know.Read it →
RAMS that hold upWhat an inspector is actually looking for in a risk assessment and method statement, and the difference between a document that exists and one that is doing its job.Read it →
Retention, and the money that goes missing after practical completionWhere cash quietly disappears between the last valuation and the release of the second half of retention, and the four dates that decide whether you ever see it.Read it →
Why field rollouts stall in week threeMost site software is not rejected. It is quietly outlived by the paper route nobody switched off. What the firms that got it to stick did differently.Read it →