At BBS, one of the first things we explain to clients is how a project will be priced. The pricing structure affects your budget control, flexibility, quality, and risk exposure.
In Indonesia, the two most common construction pricing models are Cost Plus and Lump Sum. Both are valid when used correctly—but each suits very different types of projects.
Understanding the difference upfront helps prevent disputes, cost blowouts, and misaligned expectations later.
1. Cost Plus Pricing (BBS Preferred for Most Projects)
Cost Plus means the client pays:
- The actual cost of materials
- The actual cost of labour
- Plus an agreed margin
How BBS Applies Cost Plus
- Materials are procured transparently, with shared running invoices
- Labour is charged daily or per agreed task
- A fixed percentage fee is agreed upfront
Why Clients Choose Cost Plus
- Full visibility on where money is spent
- Flexibility to change materials, design, or scope during the build
- Better quality control—no incentive to downgrade materials
Considerations
- Final cost is not fixed at the start
- Requires structured reporting and proper oversight
- Works best with clear documentation and active management
Best suited for
- Renovations with unknown variables
- Design-driven or high-spec builds
- Clients who value transparency and control
2. Lump Sum Pricing
Lump Sum, commonly referred to as borongan, is a fixed price for a clearly defined scope of work.
How It Works
- The contractor prices labour, materials, risk, and profit upfront
- One total price is agreed
- Payments are linked to milestones or progress percentages
Advantage
- Clear upfront budget
- Minimal day-to-day involvement
- Easy to compare competing quotes
- Suitable for simple, repetitive scopes
Limitations
- Changes almost always trigger variations
- Quality may suffer if costs rise
- Disputes often occur over inclusions and exclusions
- Variations can inflate the final cost well beyond the original price
Best suited for
- Well-defined scopes with complete drawings
- Small renovations or single-trade works
- Repetitive or standardised construction tasks
- Clients prioritising budget certainty over flexibility
3. Why Borongan Prices Vary Widely in Indonesia
There is no fixed government borongan rate for private construction projects. Pricing is influenced by:
- Site access and location
- Design complexity
- Labour availability
- Material price fluctuations
- Risk allowances built into the quote
Two borongan prices for the same job can differ significantly—not because one contractor is “cheaper,” but because assumptions, exclusions, and risk buffers vary.
4. Cost Control: A Common Misconception
Many clients believe:
“Borongan is always cheaper.”
In practice:
- Borongan pricing often includes hidden contingencies
- Cost Plus reflects real costs as they occur
- Poorly defined borongan scopes frequently result in costly variations
A well-managed Cost Plus project can often be more cost-efficient than a lump sum contract padded with risk allowances.
5. Hybrid Pricing: How BBS Often Structures Projects
For larger or more complex projects, BBS frequently uses a hybrid approach, such as:
- Cost Plus for structure, materials, and general works
- Borongan for specialist trades (MEP, weilders, joinery)
- Fixed management fees instead of percentage-based margins
This approach balances cost transparency, risk management, and budget certainty where it matters most.
Final Notes from BBS
Pricing issues rarely come from the model itself. They usually arise from:
- Unclear scopes
- Poor documentation
- Unrealistic expectations
- Lack of professional oversight
Understanding the right pricing structure and how it truly works—is one of the most important things to understand before construction begins.
At BBS, our role is to make that structure is clear, transparent, and aligned with your project goals from day one.