In what situation do contractors typically use at cost pricing?

Contractors typically use at cost pricing during slow construction cycles to keep their workforce active. This pricing strategy allows contractors to offer their services at a price that covers their direct costs, such as labor and materials, without adding significant markup. By doing so, they can remain competitive and ensure that their crew is engaged in work, even when overall demand in the market is low.

Utilizing at cost pricing helps contractors avoid layoffs or downtime for their workforce, which can be economically and organizationally beneficial. This approach allows them to retain skilled workers, maintain relationships with clients, and position themselves for future opportunities when the market rebounds. This strategy helps sustain business continuity and operational capacity during downturns.

In contrast, the other mentioned scenarios do not align with the rationale behind using at cost pricing. High profit margins are typically not pursued with at cost pricing, as this strategy is about covering costs rather than generating excess profit. Similarly, during periods of rapid economic growth, contractors might opt for higher pricing strategies that leverage increased demand. Lastly, when acquiring new high-value contracts, contractors are more likely to use competitive pricing strategies that can include markup to capitalize on the value of the project rather than pricing solely at cost.