Schedule of Rates in Construction: A Guide for Australian Commercial Teams

By

Josh Krissansen

Last Updated Aug 31, 2026

By

Josh Krissansen

A schedule of rates (SOR) is a pricing document that lists items of work with an agreed unit rate against each one, but with no stated quantities. Work is instructed, measured as it is completed, and paid by multiplying the actual quantity by the agreed rate, so the final contract value emerges through delivery rather than being fixed at award.

Because the format is used where scope cannot be fixed at the outset, it carries risks a lump sum contract doesn’t. Quantity risk stays with the principal, margin depends on rates that hold across unknown volumes, and every payment cycle rests on measured quantities that have to be verified and reconciled.

When priced or administered loosely, an SOR contract loses margin to volume swings and creates delays when measurement disputes arise.

In this article, we explain what a schedule of rates is, how it differs from a bill of quantities and a lump sum, how to price a rate, and how to administer one under Australian contract conditions, so you can price and run an SOR contract without giving up margin or control through delivery.

What is a schedule of rates?

A schedule of rates is a contract document that lists individual work items, each with a unit of measurement and an agreed unit rate, but no fixed quantities attached. Payment is calculated against the quantity of work actually instructed and completed, measured as the project progresses.

What this means financially is that the final contract value is not known at the point of award. It depends entirely on the volume of work instructed over the life of the contract, which is exactly why this pricing format suits work that cannot be quantified accurately up front.

On commercial projects, the contractor typically prices the schedule at tender stage against items defined by the principal or superintendent. Public sector and infrastructure clients often take a different approach, issuing a pre-priced schedule that tenderers then mark up or discount against, rather than pricing each item from scratch.

What a schedule of rates contains

A schedule of rates is built from four components:

• Item description: Sets out the work covered, the method, and any inclusions or exclusions, defined tightly enough that measurement is unambiguous.
• Unit of measurement: The basis the rate is applied against, whether that is per square metre, per linear metre, per tonne, or per item, consistent with standard measurement conventions so that claimed and measured quantities reconcile cleanly.
• Unit rate: The fully built-up price per unit, covering direct cost, overhead, and margin.
• Preliminaries and item coverage: Defines what sits inside each rate versus what is priced separately, distinguishing on-site overheads like supervision and site facilities from off-site overheads, so neither is double-counted across rates nor missed entirely.

Schedule of rates vs bill of quantities vs lump sum

The choice between these three structures depends on scope certainty. Defined scope favours lump sum or a bill of quantities, while uncertain or evolving scope favours a schedule of rates. 

Bill of quantities vs schedule of rates

A bill of quantities lists measured quantities against each item, priced by the contractor, and requires a defined scope at tender. A schedule of rates lists the same kind of items without quantities, so it applies where a bill of quantities cannot because scope is not yet measurable.

Some contracts run a hybrid, using a bill of quantities for the main works and a schedule of rates to value variations against the nearest equivalent item.

Lump sum vs schedule of rates

A lump sum is a single fixed price for a defined scope. It transfers quantity risk to the contractor and gives the principal price certainty. A schedule of rates holds unit rates fixed but leaves quantity risk with the principal, giving flexibility in place of certainty.

Why a schedule of rates demands more administration, not less

A lump sum contract is priced once against a fixed scope, and payments follow a value curve that is agreed on before work starts. That means nobody needs to remeasure to issue a payment.

A schedule of rates has no fixed quantity to divide payments against, so the only way to know what is owed is to measure what has actually been done, every claim cycle, for every item on the schedule.

That measurement is where all the extra work sits with an SOR contract.

Each completed item has to be quantified on site and recorded against the correct schedule line. On a schedule with a handful of items, this takes little time. But on a schedule with dozens of items across trades, it means dozens of separate quantities recorded each cycle rather than one aggregate percentage complete.

Each quantity then has to be matched to its agreed rate and checked against the superintendent's own assessment of the same work, with any difference between the two reconciled before the claim is submitted.

Under AS 4000 and AS 2124 (the earlier 1992 version of AS 4000 still used on some public sector work), the superintendent values instructed work against the schedule, and values variations against the nearest equivalent scheduled rate where an instructed item does not fit an existing line.

This is why the reconciliation step can’t be skipped. Payment is determined by the superintendent's valuation, so a contractor's own measurement only holds up if it can be checked against that valuation and supported with records where the two figures differ.

Where this reconciliation is done across dozens of line items in a spreadsheet, updated by hand each cycle, small errors accumulate.

A quantity entered against the wrong line, a rate not updated after a variation, or a claim that has drifted from the underlying measurement tend to appear as disputes later rather than being caught at the time.

Take a site team that records 40 m³ of excavation against the bulk excavation line, but 12 m³ of that was rock excavation, a separate line item at a materially higher rate.

If the split isn't caught, the claim understates the rock item and overstates bulk excavation by the same volume. The total can look correct at a glance, since the error nets out, but the superintendent values each line separately, so the mismatch shows up as a discrepancy on two lines rather than one.

Project controls and cost tracking tools reduce this by keeping the measured quantity, the agreed rate, and the claimed value linked to the same record, so a discrepancy is visible when it is entered rather than months later.

The measurement and reconciliation record also carries weight beyond internal cost control. 

The progress claim it produces is a payment claim under the applicable state Security of 

Payment legislation, and if that claim is disputed, an adjudicator works from the measurement record behind each line rather than the total claimed. A claim without a clear record of how each quantity was measured and matched to its rate is harder to substantiate at adjudication, regardless of whether the work was actually done. Security of Payment is state-based legislation, and timeframes and requirements differ across jurisdictions, so the specific claim mechanics need to be checked against the act that applies to the project.

In short, the administrative load on a schedule of rates sits in the ongoing measurement and reconciliation cycle rather than in the initial pricing.

A lump sum concentrates its administrative effort into pricing a fixed scope once, whereas a schedule of rates spreads that effort across every claim for the life of the contract, because each claim has to be built up from measurement rather than read off a pre-agreed price curve.

How to price a schedule of rates item

A rate for a schedule of rates item is built up from its parts, materials, labour, plant, overheads and margin, rather than copied from a price book or an old job. Copied rates carry a hidden assumption: they were priced for the quantity that job had. A schedule of rates has no set quantity, so a rate still has to make money whether the item turns out small or large.

Take one item as an example: supply and place N32 concrete to a suspended slab, measured per cubic metre.

• Materials.

  N32 supply at around $310/m³, plus roughly 5% for waste and pump priming, giving about $326/m³.

• Labour.

  A placing crew achieving around 8 m³ an hour at a crew cost near $360/hour works out to about $45/m³, priced on the output a crew actually achieves on site, not its best day.

• Plant.

  Concrete pump and vibrators apportioned across the pour at roughly $18/m³, based on the share of plant time the item uses.

• Direct cost.

  Comes to about $389/m³. Site overheads at 12% add roughly $47, taking it to $436.

• Head office overhead and margin.

  Around 10%, adding about $44, for a tendered rate near $480/m³.

The contractor sets the rate, but the principal decides how much work to order against it, so the rate has to hold at either end of that range.

If you price it for a 200 m³ pour, it can lose money if the item grows to 2,000 m³ on a thin margin. But if you pad it for a small pour, it will be too high to win where the volume is large.

A rate built up this way can be pressure-tested before it goes into the tender.

Take the site overhead and head office components, the $47 and $44 in the example above, and treat them as costs that do not shrink much even if the pour is small. Divide that combined $91 by the margin built into the rate, and you get the volume below which the item stops covering its overhead allocation.

Below that volume, the fixed cost components are being spread across too few units, and the rate doesn’t work. Checking this number against a range of potential quantities is what tells you whether you should add a floor quantity clause or a renegotiation trigger written into the item.

A schedule of rates only works when it is administered with the discipline it demands

A schedule of rates suits work that cannot be quantified at tender, but it shifts the effort from pricing a fixed scope once to measuring, matching and reconciling every claim for the life of the contract.

Built-up rates that retain margin across small and large quantities, tight item descriptions and clear preliminaries coverage, and measurement records strong enough to defend a payment claim at adjudication are what determine whether the format pays off or turns into recurring disputes.

Written by

Josh Krissansen

122 articles

Josh Krissansen is a freelance writer with two years of experience contributing to Procore's educational library. He specialises in transforming complex construction concepts into clear, actionable insights for professionals in the industry.

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