Is this a fair price? Judging a supplier's price with no agreed rate
Without an agreed rate there's no right answer to hold an invoice against, only better and worse evidence. The best is what you've already paid the same supplier, then what they'll put in writing, then what another supplier will quote for the same thing.
In short
- With no agreed rate, the best evidence is what you've already paid the same supplier for the same item, in the same unit.
- A rise against your own history is a reason to ask, not to dispute. A market rate rarely says what location, quantity or terms went into it.
- For items you buy often, ask for a price list or schedule of rates. For big or one-off orders, get written quotes for the same specification.
Start with what you've already paid
Your own invoices from the same supplier for the same item are the closest comparison you have: the same item, the same unit, delivered to the kind of job you run. Find the last few times you bought it and note each unit price excluding GST and the date. A price in line with those is the price you've been accepting. A jump is worth a question.
Compare like with like. A different unit (per length against per metre), a different grade or size, or a different delivery arrangement can make two prices look different when they aren't, or alike when they aren't.
Why your own history beats market rates
A "market rate" for a material or a trade depends on location, quantity, access, timing and specification, and a figure you find rarely says which of those went into it. Your own history already carries your locations, your quantities and your terms with the supplier, so a change in it means something.
It still isn't proof. Prices do go up, and without an agreed rate a supplier can charge more than last time. A rise against your history is a reason to ask, not a reason to dispute: tell the supplier what you paid on your last few orders and ask them to confirm the new price.
Ask for a price list or schedule of rates
If you buy from a supplier regularly, ask for their price list or a schedule of rates for the items you use, with the dates it applies. Once both sides have accepted it, every invoice has a rate to check against, and a price above it is a difference you can show the supplier. The guide to getting a supplier price list agreed covers what it should contain.
Get written quotes for bigger or one-off purchases
For a large order, or an item you don't buy often, ask two or three suppliers to quote in writing for the same specification, quantity and delivery. The guidance on business.gov.au describes a good quote as clear, specific and complete, with a clear description of what's being supplied and itemised costs, which is also what makes quotes comparable.(business.gov.au: Prepare quotes)
The lowest quote isn't automatically the best value. The same site's guidance on choosing suppliers makes the point that cheap doesn't always mean value for money, and that a supplier who can deliver on time matters too.(business.gov.au: Suppliers)
Keep the quote you accept. It's the agreed price for that order, and the invoice should match it.
What not to rely on
Some comparisons feel useful and aren't:
- a price for a different specification, a much bigger order or another region
- a price someone remembers but nobody can find on an invoice or in writing
- what another business says it pays, without knowing its quantities or terms
What CostCode does without an agreed rate
For a line with no agreed rate, CostCode compares the price with what you've paid the same supplier for the same item code or description, over the previous 180 days by default, once there are three earlier prices to go on. A difference stays with your team and is never quoted to the supplier, because your purchase history is evidence for you, not something the supplier agreed to. CostCode doesn't compare your prices with other businesses' invoices. A line with no agreed rate and too little history shows as unverified with the reason.
The free check does a quick version of this. Drop two or more invoices from one supplier on it and it shows how each item's price moved between them, with the comparison worked out in your browser. Without the rate you agreed a rise isn't necessarily an overcharge, so treat the list as questions to ask.
Questions
What's a fair price for building materials?
There's no single figure: it depends on the item, the quantity, the delivery and the supplier. The most useful benchmark is what you've recently paid the same supplier for the same item, then written quotes for the same specification.
Can I dispute a price we never agreed?
You can ask about it, and should if it has jumped against what you've paid before. Without an agreed rate it's a question for the supplier rather than an overcharge you can prove, so ask them to confirm the price and agree one for next time.
Should I check invoices against published market rates?
As a rough guide at most. You rarely know the location, quantity or specification behind them. Your own history with the supplier, and quotes you've asked for, are better evidence.