Rethinking the pricing model of construction projects?

1 introduction from the founding of the people's Republic of China to the reform and opening up, the standard quota valuation management mode under the planned economy system has been implemented in the valuation and settlement of capital construction projects in China. After the reform and opening up, in order to meet the requirements of the development of the construction market, in view of the problems existing in the compilation and use of engineering budget quota, the reform measures to control engineering quantity, guiding price and competition fee are put forward in 1992. The consumption of labor, materials and machinery in the project budget quota is separated from the corresponding unit price. The consumption of people, materials and machinery is determined according to the relevant national norms and standards and the social average labor productivity level of construction enterprises, and its price is determined by the average labor productivity level of construction enterprises. This reform measure has played a positive role in effectively controlling the project cost. However, with the acceleration of the marketization of construction industry, the mandatory state of project budget quota is still difficult to change. Statutory consumption reflects the consumption level under the condition of social average labor productivity, but it cannot accurately reflect the individual cost of construction enterprises, fully reflect the differences in technical equipment level, personnel quality, management level and labor productivity of enterprises, ensure all enterprises to achieve real all-round strength competition in bidding activities, and fully mobilize the enthusiasm of enterprises to strengthen management. In order to further reform the project pricing model, the Ministry of Construction began to organize relevant departments and experts to prepare the bill of quantities pricing method in February 2002. In order to strengthen the authority and compulsion of the valuation method of bill of quantities, the Code for Valuation of Construction Projects was finally issued and came into effect on July 1 2003. There are both combinations and differences between the pricing standard and the current budget quota, which embodies the guiding ideology of government macro-control, independent quotation of enterprises, competitive pricing in the market and dynamic supervision of departments. At the same time, it also stipulates the scope of projects that must be priced by list, and the projects outside the scope can be priced by list or quota. The pricing quota and quota are updated at the same time according to the five-year update system, forming a dual-track pricing management model with parallel listing pricing and quota pricing. 2 Changes of Bill of Quantities Valuation since its implementation on February 7, 2003 17 As the national standard of People's Republic of China (PRC), Code for Bill of Quantities Valuation of Construction Projects was promulgated and implemented on July 1 2003. Bill of quantities valuation is an important reform in the history of engineering valuation, and people in the industry have high hopes for its implementation. It is generally believed that this reform is of epoch-making significance in the history of valuation development. The expected purposes of the implementation are: first, standardize the market order, promote the orderly competition in the construction market and the healthy development of enterprises; Second, change the government function in the project cost management in China and strengthen the macro-control of the government; Third, it is conducive to implementing the principles of justice, fairness and openness and standardizing bidding activities; Fourth, guide enterprises to formulate enterprise quotas according to their own conditions to improve management level and competitiveness; Fifth, reasonably divide the project risks of owners and contractors. The owner bears the risk of engineering quantity change and the contractor bears the risk of price fluctuation, which embodies the principle of risk sharing. Since the implementation of the bill pricing model, it has played a great role in the above aspects and received certain results. However, compared with the expectations at the beginning of the preparation and implementation, there is still a certain gap, mainly in the following aspects. 2. 1 In the bidding stage, it is still impossible to implement the strategy of winning the bid at a low price. In order to prevent vicious competition, there are often both the highest price limit and the so-called reasonable low price limit in bidding at this stage. In this case, there are often three situations in bidding: ① bidding is carried out, and the two sides negotiate the price before going through the bidding procedure, which is called fake bidding; (2) Hit the Universiade. Since there is a highest price and a lowest price, and Party A is really bidding, try to calculate a value in the middle; (3) the lottery, the total price is determined by Party A in advance, and then announced to the public. Enterprises that meet Party A's access conditions and accept this price, such as unit qualification and strength, are numbered uniformly, and then the lottery is carried out under the supervision of the notary department, which unit is the winner. This way is essentially a lottery. It should be said that these three methods do not meet the original intention and essential requirements of the bidding system. When a pricing model makes the bidding lose money, it shows that the pricing model itself has some defects. In order to make bidding return to its true colors, we need to emancipate our minds and boldly innovate the current pricing model. 2.2 The formation of enterprise quota is based on the idea of implementing list pricing from the beginning, which requires enterprises to gradually compile their own enterprise quota and realize independent quotation of enterprises. At present, the prevailing practice is that there is both a maximum price limit and a minimum price limit when bidding, which is set by the owner according to the quota and relevant cost documents. If you want to win the bid, you can only calculate the comprehensive unit price from the list according to the current quota and relevant cost documents, and then summarize it into a tender in the form of a list. Therefore, although it is a list method, it is still the essence of quota, and enterprise quota has neither soil nor use. 2.3 The valuation of risk allocation list should be based on the separation of quantity and price. Party A is responsible for providing the quantity and bearing the quantity risk, while Party B makes an independent quotation and bears the price risk. However, the risk of quantity is very limited. In the actual operation process, the construction unit still has to bear most of the risks involved in the construction process, such as time limit for a project risk, quality risk, price risk, capital risk and safety risk. Compared with the risks borne by the owners, the risk distribution is still seriously unbalanced. 2.4 In terms of government macro-control and market order, since the implementation of the list system in 2003, the changes caused by bidding, project quality and project management level are not obvious; In terms of eliminating the phenomenon of "two delays", although all localities and cities have set up special institutions such as debt settlement offices to maintain a high-pressure situation to solve this problem, it is still a cycle of clearing up first and then owing. It can be seen that this pricing and settlement method has not played a very obvious role in restraining the formation of triangular debts and debt chains and standardizing market order. 3. Reanalyze the adaptability between the current pricing model and the construction industry. 3. 1 The essence of the dual-track pricing model is still that the fixed pricing list pricing model has been implemented for nearly 7 years, and the 2008 version of the pricing specification has also been implemented as an updated version of the 2003 version. The pricing specification also makes mandatory provisions on the scope of projects that must be priced by list. For out-of-scope projects, both list mode and quota mode can be adopted, that is, project pricing is currently a dual-track pricing mode with quota and list in parallel. However, since the implementation of bill of quantities valuation for seven years, the changes in the construction industry, the impact on the construction market and the implementation effect are far less than the original expectations and assumptions. The so-called list pricing or list bidding, the current unified practice in the industry is to budget according to the quota and the cost documents of the same period, and then return to the list quantities provided by Party A to form a comprehensive unit price, and finally bid in the form of list quotation. The block price and the lowest cost price given by the owner in the tender are also given according to the quota, that is to say, compared with the list pricing of the same project at this stage, it is nothing more than a change in form and name, and there is not much difference in essence. Therefore, the implementation of the bill of quantities valuation method has little impact on the construction industry, and it is not difficult to understand that various constraints and inadaptability caused to the construction market under the original quota form still exist, and the bill of quantities valuation method has not completely jumped out of the traditional quota valuation thinking mode. 3.2 Price precedes quality, which does not conform to the common sense of pricing by quality and violates the formation law of quality and price. No matter whether it is in the form of quota pricing or list pricing, the current customary thinking formula is to determine the total price of the project first. However, at this time, the project has not yet started. Although the quality level of the project is described in the tender, this description is only a procedural commitment, which is fictitious and not rigorous. The actual quality level of an engineering entity mainly depends on two aspects, one is the performance and quality level of building materials, and the other is the construction technology and management level, especially the building materials that constitute the entity play a decisive role in the engineering quality. Today, with the unprecedented prosperity of the market, the prices of materials of the same nature differ several times or even dozens of times due to the differences in quality and performance. But in the case that the project has not yet started and the brand and price of the materials actually used in the project have not yet been determined, who will win the bid? Although the material price in the tender price is based on the government guidance price, and the positioning of the guidance price generally refers to the mid-range materials in the market, as far as the mid-range materials are concerned, the price range between different brands is also very different, so the guidance price itself is quite vague and uncertain. It is precisely because of this ambiguity and uncertainty that in the construction process after winning the bid, there are always differences between Party A and Party B in the selection of materials. Finally, the contractor always chooses low-quality and low-cost materials for the project on the grounds of cost, which brings great difficulties to the management of construction links. This way of pricing before quality violates the order of price formation, which often leads project managers to invest at price and pay attention to price quality. In the end, the contractor got the expected profit when the project was completed, but the quality level of the project entity could not meet the promise of bidding contract. Therefore, we should price after the quality formation process is completed, and the price formation process depends on the quality formation process, which should be quality first, price second, price in quality and price in quality; We can't put quality into the price and then reverse the order. 3.3 Under the current pricing model, the risk distribution is obviously unbalanced. According to relevant publicity materials, the list pricing model embodies the principle of reasonable risk allocation and burden on both parties. The employer shall bear the quantity risk and the contractor shall bear the price risk. In fact, the contractor still has to bear almost all risks, especially the material price risk. The material cost of a project accounts for about 70% of the total cost, and its price fluctuation has a great influence on the total cost, even a project can hit a company hard because of price fluctuation. In fact, the construction unit generally does not produce any building materials, and its main duty and function is to process and shape various building materials by using its own technology according to the drawings. The grade, variety, performance, effect and price of the materials used by the engineering entity shall be independently selected by the Employer according to his own strength and preference, and he shall be responsible for the material quality, price risk and corresponding capital demand. However, in the mode of price first and quality second, the responsibility and risk of materials are passed on to the contractor, and the financial pressure and risk are unprecedented. In practice, after the price increase of materials, both the employer and the contractor benefit, all at the expense of the other party, and its essence belongs to unjust enrichment. Due to the implementation of the project, the employer and the contractor have emerged, and they should have their own roles and division of labor in the project. For the construction unit, its main energy should be focused on how to do a good job in construction management, improve construction technology and quality, scientifically organize construction, speed up construction progress, improve construction level, and work hard in the construction field closely related to construction technology and construction management, rather than making it run around in order to obtain a large amount of procurement funds that the employer should be responsible for.

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