Bill of Quantities vs Schedule of Rates

Tuan Duong

Accurate and thorough documentation is what keeps construction projects on track and on budget, steering every phase from the initial blueprint to the project’s completion. 

Two popular documentation choices for streamlining project management are the Bill of Quantities and the Schedule of Rates.

Though similar, their most fundamental features make them better suited to their specific project requirements, particularly in estimates, workflow and tendering. 

In this article, we will provide a detailed breakdown of what both a Bill of Quantities and a Schedule of Rates are in more detail, the parties involved in each, the types of projects in which they are most suited, as well as the best option from the client’s perspective.

What is a Bill of Quantities?

A Bill of Quantities (BoQ) is a comprehensive document typically used in the construction industry during the tendering process. A BoQ is a valuable tool providing an itemised list of materials, parts, and labour (and their costs) required throughout each project stage.

It’s the standard method in Australia, similar to a detailed shopping list that includes everything you will need to complete a project, from bricks and cement to manual labour and equipment hire. 

Such an extensive breakdown enables contractors to price accurately, and you, as the property owner, to anticipate the overall project cost, getting everyone on the same page.

A professional quantity surveyor will assemble the BoQ using drawings and specifications from the design team, making it an integral part of construction contracts and serving as a reference for both parties in the agreement throughout all price control and progress monitoring activities.

The Purpose of a Bill of Quantities

  • Improving effectiveness: A BoQ goes beyond item coverage and provides a detailed breakdown of materials, labour and equipment that teams will need for a project.
  • Clearer comparison: All prospective contractors can strategise and bid based on the same specifications, ensuring an apples-to-apples comparison throughout the project.
  • Enhancing efficiency: With a precise BoQ, contractors can better plan their resources, leading to significant savings and overall project efficiency.
  • Ensuring transparency: A BoQ eliminates the room for ambiguity in a tender document. All parties have the same understanding of the task at hand, which reduces disputes and delays.
  • Optimising project management: A BoQ helps track project costs, process payment applications, and deal with variations or changes to the project scope.

Key Components of a Bill of Quantities

A Bill of Quantities (BOQ) consists of several core components, each playing a significant role in conveying all necessary information for a project: 

Item Description 

Your BoQ will begin by detailing specific work tasks, providing clarity about the requirements of each task and making it easier to plan, implement, and price the work. 

Unit 

Square metres, cubic metres, kilograms and other suitable measurements will detail the metric of quantity of work, streamlining and standardising the estimation process. 

Quantity 

As the name suggests, ‘quantity’ represents the amount of materials or work required for each item in the BOQ, forming the basis for calculating the total expenditure. A clear and accurate quantity representation ensures a contractor can accurately bid for the project. 

Rate per Unit 

The ‘Rate Per Unit’ estimates the prices to undertake the work described for each unit of measurement, helping to determine the total cost of each item and influencing the overall project’s final outlay. 

Total Amount 

By multiplying the ‘Quantity’ by the ‘Rate per Unit’, the BoQ will provide a figure representing the estimated cost for completing an item of work. It provides a snapshot of the potential overall cost, not just on certain types of work, helping to better inform budget decisions. 

What is a Schedule of Rates?

A Schedule of Rates (SoR) also offers a list of components that make up a construction project, but focuses more on the standard industry rates related to staffing, labour, equipment hire, etc. 

It will not include any quantities for the items throughout the project, but it is still quite exhaustive, holding every detail, from the cost of labour for laying a single brick to the cost of excavating a cubic metre of earth. 

The rates within these schedules stem from extensive market analysis and include all overhead costs, profit margins, and possible risks.

The Purpose of a Schedule of Rates

A SoR is helpful when the nature of the work throughout a project is known, but the exact quantities are still up for debate. It will compile all the costs of these tasks and associated expenses, like hiring specialised plant & equipment, making it a useful tool for creating accurate and reliable project cost estimates

Moreover, a SoR is particularly handy when dealing with unforeseen changes or additions to the project, making it a flexible tool. It allows you to anticipate and calculate the cost implications – all without renegotiating the entire contract or costing plan. 

Key Components of a Schedule of Rates

As explored above, a SOR lists different works needed in a project with corresponding charges or rates. Within this list, there are typically three fundamental elements: 

  1. Work Item: A description of a specific task or job within the construction project. For example, ‘installing bathroom tiles’ or ‘painting living room walls’.
  2. Unit: The measurements used in work rates, either by area, volume, time, or quantity, such as a dollar amount per hour for a specific contractor.
  3. Rate: The cost or fee for performing each unit of work. In simpler terms, it’s ‘how much’ for ‘how much work’. This rate includes the costs of labour, materials, overheads, and profits.

This isn’t a set framework, though. Projects regularly see adjustments in their Schedule of Rates depending on the specific requirements at hand, whilst still providing a clear, understandable blueprint of what work needs to be done, how much of it, and at what cost. 

The Pros and Cons: Bill of Quantities Vs. Schedule of Rates 

While a majority of Australian property owners favour a Bill of Quantities, it helps to have a simple comparison of benefits and drawbacks to form your own opinion: 

The Advantages and Disadvantages of a Bill of Quantities 

  • Pro: Enhanced Budgetary Control – A comprehensive Bill of Quantities allows for meticulous financial planning, potentially minimising the risk of unexpected costs or budget overruns.
  • Pro: Detailed Material and Labour Estimation – It provides a detailed assessment of the required materials and labour, reducing the chances of procurement issues or staffing delays.
  • Con: Extended Preparation – Due to its detailed nature, preparing a Bill of Quantities may require specialist skills, adding some extra time and expense to the preparation process.

The Advantages and Disadvantages of a Schedule of Rates 

  • Pro: Greater Flexibility – The Schedule of Rates is adaptable to changes in work scope, ideal for projects where this is undefined or likely to fluctuate/change.
  • Pro: Faster Preparation – Compared to the bill of quantities, preparing a Schedule of Rates requires less time and specialist knowledge.
  • Con: Lack of Cost Certainty – Budget overruns are risky without a fixed estimate for the total prices, especially if labour or material requirements exceed expectations.
  • Con: Less Transparent Process – Contractors may include risks and contingencies in their rates because the total cost is not provided.

When it comes to choosing between a Bill of Quantities and a Schedule of Rates, there’s no one-size-fits-all solution. That said, around 50% of Australian property owners reported a lack of transparency in construction cost estimates when using a Schedule of Rates. 

For this reason, our team at Duo Tax offers industry-leading services related to developing a tailored Bill of Quantities for your project. We aim to create a comfortable, enlightening experience filled with actionable advice and handy tips, no matter where you’re starting from. 

For more information, speak with our experts at Duo Tax today!

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Disclaimer: Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek a second professional opinion for any legal or tax issues raised in your investing affairs.

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Tuan Duong

Tuan is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation.

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