Schedule of Rates

A schedule of rates provides the pricing framework for construction or maintenance work where quantities are unknown at the time of contract award. It is the natural pricing mechanism for term contracts, framework agreements, and reactive maintenance programmes, where the contracting authority needs to commission a variety of tasks over time without knowing the precise volume of each in advance.

What is a Schedule of Rates?

A schedule of rates lists discrete items of work, each described with sufficient precision to allow a contractor to apply a unit rate. Unlike a bill of quantities (BOQ), there are no pre-set quantities against each item. Instead, work is instructed as it arises, measured on completion, and valued by applying the agreed rate to the measured quantity.

Schedules of rates are structured to cover the categories of work likely to arise under the contract. A highways term maintenance contract, for instance, might include rates for pothole repair per square metre, kerb replacement per linear metre, drainage inspection per location, and road markings per square metre. A building maintenance schedule might cover plastering, painting, glazing, plumbing, and electrical work at trade level.

Competition in a schedule of rates procurement is on the rates themselves. The contracting authority typically provides a notional bill or a representative sample of anticipated work volumes to allow bidders to understand the likely weighting of items. The evaluation may use the notional bill to calculate a projected contract value for comparison, even though the actual spend will depend on the work that arises.

Schedules of rates are widely used in the UK public sector for housing maintenance, highways maintenance, and facilities management contracts. They appear in the JCT Measured Term Contract, the NEC Term Service Contract (TSC), and various national equivalents across European procurement markets.

Provisional sums may also appear alongside a schedule of rates, covering categories of work that require specialist instruction or where rates cannot be pre-agreed.

Why it matters for bidders

Pricing a schedule of rates requires understanding the authority's likely work pattern. Under-pricing high-volume items reduces margin on the bulk of the work. Over-pricing low-volume items risks losing the competition on the notional evaluation. The optimal strategy is to identify which items are likely to be instructed most frequently and price them to achieve the target margin across the life of the contract.

The commercial risk on a schedule of rates contract is asymmetric: the contractor commits to rates for typically three to five years, while inflation, material costs, and labour markets may move significantly. Bidders should consider whether the contract includes provisions for price adjustment, such as RPI indexation, or whether rates are fixed for the contract term.

Example

A UK water utility procures a four-year civil maintenance term contract. Bidders are given a schedule of rates covering 380 items across earthworks, concrete repair, fencing, pipework, and structural work. They are also given a notional bill showing expected volumes over year one, which the authority uses to calculate a hypothetical year-one spend for evaluation. The winning contractor commits to the submitted rates for the full four-year term, with quarterly CPI indexation applying from the second year.

Frequently Asked Questions

Can a schedule of rates be used for above-threshold works contracts?

Yes. A term contract based on a schedule of rates, where the aggregated value over the contract term exceeds the EU works threshold, must be procured in compliance with Directive 2014/24/EU and advertised on TED. The contracting authority must estimate the total contract value for threshold purposes, including option years.

What happens if work arises that is not covered by a rate in the schedule?

Most contracts include a mechanism for agreeing a new rate for work not covered by the schedule, often by reference to daywork rates or by negotiation based on comparable items. The contract should specify this process clearly to avoid disputes.

How is a schedule of rates evaluated compared to a BOQ?

With a BOQ, the evaluation applies the same quantities to every bidder's rates, giving a direct price comparison. With a schedule of rates, the authority uses notional quantities as a proxy. This means the evaluation is less precise, and the authority must be satisfied that the notional volumes are representative of likely actual demand.