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Methodology

Project Quote Builder methodology

This planner reconciles task-row labour, direct costs, allocated overhead and contingency before grossing protected cost up to a user-entered target delivery margin.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Task labour
Lᵢ = hᵢ × rᵢ

Where

hᵢ
task hours (hours/task)Source: Business record
rᵢ
internal labour rate (currency units/hour)Source: Business record
Lᵢ
task labour cost (currency units/task)Source: Calculated output
Base project cost
C = Σ(Lᵢ) + M + S + D + O

Where

C
base project cost (currency units/project)Source: Calculated output
Lᵢ
task labour cost (currency units/task)Source: Calculated output
M, S, D, O
materials, subcontractors, other direct costs and overhead (currency units/project)Source: Business record
Contingency allowance
A = C × c

Where

C
base project cost (currency units/project)Source: Calculated output
c
contingency rate (decimal)Source: User decision
A
contingency allowance (currency units/project)Source: Calculated output
Protected project cost
Cₚ = C + A

Where

C
base project cost (currency units/project)Source: Calculated output
A
contingency allowance (currency units/project)Source: Calculated output
Cₚ
protected project cost (currency units/project)Source: Calculated output
Quote excluding indirect tax
Q = Cₚ ÷ (1 − m)

Where

m
target delivery margin (decimal)Source: User decision
Cₚ
protected project cost (currency units/project)Source: Calculated output
Q, Qₙ
quote excluding and including indirect tax (currency units/project)Source: Calculated output
Quote including indirect tax
Qₙ = Q × (1 + g)

Where

g
indirect tax rate (decimal)Source: User assumption
Q, Qₙ
quote excluding and including indirect tax (currency units/project)Source: Calculated output
Hourly commercial revenue
Rₕ = Σ(hᵢ) × rₕ

Where

hᵢ
task hours (hours/task)Source: Business record
rₕ
customer hourly rate excluding indirect tax (currency units/hour)Source: User decision
Rₕ
hourly commercial revenue excluding indirect tax (currency units/project)Source: Calculated output
Added scope cost
C_delta = H_delta × rᵢ + D_delta

Where

rᵢ
internal labour rate (currency units/hour)Source: Business record
H_delta, D_delta, p_charge
added scope hours, added direct cost and charged share (hours, currency units/project and decimal)Source: User decision
C_delta, Q_delta, Q_charge
added scope cost, full change quote and charged amount (currency units/project)Source: Calculated output
Full change quote
Q_delta = C_delta ÷ (1 − m)

Where

m
target delivery margin (decimal)Source: User decision
H_delta, D_delta, p_charge
added scope hours, added direct cost and charged share (hours, currency units/project and decimal)Source: User decision
C_delta, Q_delta, Q_charge
added scope cost, full change quote and charged amount (currency units/project)Source: Calculated output
Charged change amount
Q_charge = Q_delta × p_charge

Where

H_delta, D_delta, p_charge
added scope hours, added direct cost and charged share (hours, currency units/project and decimal)Source: User decision
C_delta, Q_delta, Q_charge
added scope cost, full change quote and charged amount (currency units/project)Source: Calculated output
Fixed quote with risk buffer
Q_fixed = Q₀ × (1 + b_fixed)

Where

Q₀, b_fixed, H_case
fixed quote before risk, fixed risk buffer and best/base/worst hours (currency units/project, decimal and hours/project)Source: User assumption
Q_fixed, C_case, R_case
buffered fixed quote, scenario cost and scenario hourly revenue (currency units/project)Source: Calculated output
Duration-case delivery cost
C_case = H_case × rᵢ

Where

rᵢ
internal labour rate (currency units/hour)Source: Business record
Q₀, b_fixed, H_case
fixed quote before risk, fixed risk buffer and best/base/worst hours (currency units/project, decimal and hours/project)Source: User assumption
Q_fixed, C_case, R_case
buffered fixed quote, scenario cost and scenario hourly revenue (currency units/project)Source: Calculated output
Duration-case hourly revenue
R_case = H_case × rₕ

Where

rₕ
customer hourly rate excluding indirect tax (currency units/hour)Source: User decision
Rₕ
hourly commercial revenue excluding indirect tax (currency units/project)Source: Calculated output
Q₀, b_fixed, H_case
fixed quote before risk, fixed risk buffer and best/base/worst hours (currency units/project, decimal and hours/project)Source: User assumption
Q_fixed, C_case, R_case
buffered fixed quote, scenario cost and scenario hourly revenue (currency units/project)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

Design is 10 hours × 120 currency units = 1,200 currency units and build is 30 hours × 150 currency units = 4,500 currency units. Adding 500 currency units of materials, 1,000 currency units of subcontractors and 600 currency units of overhead produces a base cost of 7,800 currency units.

Calculation and outputs

Example

Design is 10 hours × 120 currency units = 1,200 currency units and build is 30 hours × 150 currency units = 4,500 currency units. Adding 500 currency units of materials, 1,000 currency units of subcontractors and 600 currency units of overhead produces a base cost of 7,800 currency units.

Task labour
5,700.00 currency units
Base cost
7,800.00 currency units
Protected cost
8,580.00 currency units
Quote ex indirect tax
11,440.00 currency units
Quote inc indirect tax
11,440.00 currency units
Full scope-change quote
1,333.33 currency units
Fixed quote with risk buffer
11,000.00 currency units
Worst-case fixed delivery margin
4.5%

A 10% contingency is 780 currency units, so protected cost is 8,580 currency units. At a 25% target margin, the quote is 11,440 currency units excluding indirect tax, or 12,584 currency units including indirect tax at 10%, with 2,860 currency units of delivery profit.

Interpretation

Treat the quote as a protected commercial starting point, then reconcile it with scope, exclusions and client value.

3. Validation and boundary checks

  • Every task contribution equals its hours multiplied by its internal rate.
  • 11,440 currency units × (1 − 25%) reconciles to the 8,580 currency units protected cost.
  • Removing indirect tax from 12,584 currency units at the 10% scenario reconciles to 11,440 currency units.
  • Contingency remains a delivery-cost allowance and is never labelled as profit.
  • Hourly commercial revenue equals total entered task hours multiplied by the entered customer hourly rate.
  • Absorb, partial-charge and full-change scenarios use the same added cost; only the charged share changes.
  • Best, base and worst hours are ordered, and each fixed/hourly margin reconciles from the same internal cost per hour.

4. Assumptions and source classification

  • Task hours, internal rates, costs, contingency and target margin are user-supplied project assumptions.
  • Contingency is added to base project cost as base cost × contingency rate; it is not a gross-up that divides cost by one minus the rate.
  • All task rates and project costs exclude indirect tax; the editable indirect tax scenario applies only to the final quote.
  • The illustrative 10% indirect tax scenario is editable and is not a jurisdiction default; confirm the applicable treatment before using it.
  • The customer hourly rate is user supplied and is not inferred from internal delivery-cost rates.
  • Scope-change charge share, duration cases and risk buffer are user decisions rather than legal or market defaults.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The planner excludes contract clauses, payment and collection risk, awards, payroll, income tax, scheduling, demand and actual-job tracking.
  • It is educational quote support, not legal, accounting, tax or personalised business advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.

Related reading

Guides to interpret the decision and its assumptions.

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