Pricing and Revenue Planning in the Project Business

The project business is characterized by one-time product service offerings which clearly distinguish themselves from product business with respect to complexity, size and individuality. Due to long production and processing periods, which often amount to a number of years, planning risks arise as a result, which make an ex ante determination of the price difficult. However, especially for project tenders, the supplier must perform an estimate of the project costs incurred which is as accurate as possible in order to on the one hand have a chance against its competitive bidders during the submission of tender and on the other hand to ensure concluding the project in a cost-covering or profitable way. The decision about the price level thus requires a careful project calculation and systematic revenue planning in the project business. Moreover the calculation risks, which are e.g. caused by wage and material price fluctuations across the project duration, must be mitigated to a great extent. This chapter shows calculation methods and explains them using practical calculation samples. The calculation methods (e.g. kilo cost methods or detail calculation) are used in various project phases and vary in terms of their calculation effort and the reliability of the results. Procedures and contractual agreements such as price reservations or price adjustment clauses for the minimization of calculation risks are also explained and described by reference to a practical example.