Construction tendering and costing in the UAE

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A contractor's tender runs from the client's inquiry to a priced quotation, built on landed material costs and labour, then to the award and a costing sheet that sets the budget the project will be measured against. Variations change the contract value and the costing, and a formal handover passes the job from the sales side to delivery.

Inquiry and quotation

Every job starts as an inquiry: the client's scope and items before any price exists. The quotation prices each line, usually on landed cost plus margin, and states validity, terms and the 5% VAT that will apply. Use the VAT calculator to check a quote's VAT.

Record each inquiry even when you decide not to bid. The record of what was declined and why helps the next estimate and shows which clients and sectors are worth pursuing.

Pricing the labour in a tender

Labour cost in a UAE tender is more than basic salary. It carries allowances, the end-of-service gratuity that accrues every month, overtime on long site days, annual leave, visas and accommodation. Pricing labour on salary alone understates the true cost. The gratuity calculator, overtime calculator and annual leave calculator give the statutory figures to build into a labour rate.

Building a landed price

Import VAT at 5% is normally recovered by a registered importer, so it is a cash-flow item rather than a cost. In SupaJack Construct the landed price is the sum of its components and is stored with the quote line.

Components of a landed price for imported material
ComponentWhat it covers
Supplier priceEx-works or FOB price on the supplier's quote
FreightShipping to the UAE port
InsuranceCover while in transit
Duties and clearanceCustoms duty and clearing charges
Delivery to siteTransport from port or warehouse to site

From award to budget

SupaJack Construct keeps a commercial and a quantity surveying costing sheet per project. A variation raises the sheet's version rather than starting a new sheet, so the budget history stays in one place.

Records that carry a tender into delivery
RecordPurposeWho owns it
InquiryScope and items requestedSales
QuotationPriced offer with termsSales and estimating
AwardThe client's acceptance and contract valueCommercial
Costing sheetBudget the job is measured againstCommercial and quantity surveying
VariationAgreed change to scope and valueCommercial
Sales handoverEverything delivery needs to startSales to operations

Guarantees at award

Clients commonly ask for an advance payment guarantee against any advance and a performance guarantee for the contract. A guarantee's face value is a bank's promise, not money that has moved, so SupaJack Construct records it as a memorandum and posts only the bank's commission and any cash margin actually lodged.

Payment terms set at tender

The payment terms agreed at award decide cash flow for the whole job: the advance and its recovery rate, progress payments, retention and how it is released, and whether cheques are post-dated or paid by letter of credit. SupaJack Construct stores these per project and reads them when each invoice is raised. Model them with the payment certificate calculator and the advance recovery calculator.

Common mistakes

  • Quoting on supplier price instead of landed cost.
  • Letting variations live in emails so the costing sheet no longer matches the contract value.
  • Agreeing retention and advance terms that the cash flow cannot carry.
  • Posting a guarantee's face value to the ledger as if money had moved.
  • Handing a job to site without the documents delivery needs.

Where it connects

Read the interim payments guide and the procurement guide, and see the money trail.

Questions people ask

What is a construction inquiry?

The client's request with scope and items, before a price exists.

What goes into a construction quotation?

Priced lines, usually on landed cost plus margin, with validity, terms and VAT.

What is a costing sheet?

The project budget built after award, which actual costs are measured against.

How are variations handled?

As agreed changes to scope and value; in SupaJack Construct they raise the costing sheet's version.

What is an advance payment guarantee?

A bank guarantee protecting the client's advance until it is recovered.

What is a performance guarantee?

A bank guarantee that the contractor will perform the contract.

Does a guarantee go on the balance sheet?

Its face value is a memorandum item; only the bank's commission and any cash margin are real postings.

Which payment terms matter most?

Advance and recovery rate, progress payments, retention and its release, and payment method.

What is a sales handover?

The formal passing of a won job from sales to the delivery team with everything they need.

Is VAT shown on a quotation?

It should be clear whether prices include 5% VAT, since construction services are generally standard-rated.

Sources

  1. Federal Decree-Law No. 8 of 2017 on Value Added Tax and amendments (Federal Tax Authority)
  2. Federal Tax Authority: VAT legislation
  3. FTA VAT Guide: Real Estate (VATGRE1), section 12 on the construction industry
  4. Ministry of Finance: UAE electronic invoicing
  5. Dubai Municipality: Dubai Building Code

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