Unbalanced Pricing

The pay items are provided along with the Pay Quantities. If the pay items are to be measured and paid on the final measured quantity, then we can provide information to price the pay items to maximize the return. Some specifications are written that if an over or under pay item runs a certain percentage, then the unit price is negotiated. With this understanding, you can forecast the final revenue result.

  • Even run - When the pay quantity and forecast quantity match,

  • Over run – When the forecast quantity is greater than pay quantity.

  • Under run – When the forecast quantity is less than the pay quantity.

The following image shows a typical over run and under run example. The overrun quantities are shown in green and the underrun quantities are shown in red. The job is balanced priced where all pay items are using their balanced unit price. In the Variance column, the Profit row variance shows the ADD amount of $4153.47.

This means that if the Forecast Quantities become the final measure amount, the amount of $4153.47 is lost. This is the difference between the Target Profit and the Forecast Profit. The issue is that the underrun quantity is priced using Balanced Price, meaning there are 3,000 tons that we will not be paid for if I’m expecting a total of 35,000 tons.

Now, we will use the system’s Unbalanced feature to price all the pay items as shown in the following image.

The Unbalanced Autoprice option priced out the underrun with its Direct Cost only. The overhead and profit share of the underrun was spread proportionately to the overrun items. The underrun was priced lower than normal, and the overrun items were priced higher than normal.

The Variance column of the Profit row variance shows the CUT amount of $61,723.49, meaning if my forecast quantities end up being the final measured quantities, we will have an additional $61,723 dollars in profit.

The cut simply allows you to decide if you want to keep the final Proposal price as shown, or to cut the $61,000 or any portion of it from the final proposal amount for the job to keep your Forecast Quantities in the final measured quantities. You can also enter any preferred unit price.