Pricing in Construction Project Management Performed by the Self-employed

Abstract

The price is the decisive parameter in evaluating the competition for the implementation of construction works. It's clear and correct determination is an important principle of project management and the basis for success of construction projects. The method of determining the price of the construction work with the aid of so-called ‘calculation formula’ has been for many decades commonly used in Czech construction industry as a basic tool for pricing. It is based on the situation when the person performing the construction work is an employee of the contractor (within the meaning of the Labour Code). All the items of the calculation formula of particular construction work can be derived from the standards used by a company, costs known in advance (contractual wages, statutory deductions from wages, machinery work, overhead costs) and the intended profit. The situation is different in case of a natural person who works on his/her own, within the meaning of The Trade Licensing Act. Apart from overall costs, part of his/her “wage” (remuneration) must cover the cost of living. In this article, the authors use the principle of retrograde calculation and propose a method whereby a self-employed person is also able to accurately calculate the cost of a construction work. Part of the calculation is also the determination of net income after subtracting all statutory deductions. In the future, the use of the suggested calculation with provability of sub-items can become a tool for increasing competitiveness of the self-employed.The price is the decisive parameter in evaluating the competition for the implementation of construction works. It's clear and correct determination is an important principle of project management and the basis for success of construction projects. The method of determining the price of the construction work with the aid of so-called ‘calculation formula’ has been for many decades commonly used in Czech construction industry as a basic tool for pricing. It is based on the situation when the person performing the construction work is an employee of the contractor (within the meaning of the Labour Code). All the items of the calculation formula of particular construction work can be derived from the standards used by a company, costs known in advance (contractual wages, statutory deductions from wages, machinery work, overhead costs) and the intended profit. The situation is different in case of a natural person who works on his/her own, within the meaning of The Trade Licensing Act. Apart from overall costs, part of his/her “wage” (remuneration) must cover the cost of living. In this article, the authors use the principle of retrograde calculation and propose a method whereby a self-employed person is also able to accurately calculate the cost of a construction work. Part of the calculation is also the determination of net income after subtracting all statutory deductions. In the future, the use of the suggested calculation with provability of sub-items can become a tool for increasing competitiveness of the self-employed.