Overhead And Profit For Construction

rayster

I have been a mechanical contractor for the past 17 years. We have been concentrating on the HVAC service segment of the industry and have done piping and sheet metal new construction projects, but it has been hit and miss on winning successful bids. I have invested time and money into estimating and products and systems and have a good handle on the cost side of our estimates. My problem is that 15% seems to be the majic number for O&P on these types of jobs in order to get an award of a project. Our overall overhead is 17% and if we want to net 10% profit, that brings our total O&P to 27%.

We have three basic divisions in our business:
1. Piping
2. Sheet metal
3. HVAC Service

My question is: Is there a formula or way to divide overhead contribution over these three segments of our business where a sheet metal or piping job can maintain a 15% O&P and still contribute adequately to the total overhead of the business?

HVAC Service can contribute more percentage per job due to the nature of that type of work say 35% O&P, but in order to ramp up the service side, requires more overall overhead.

I could use some input from a successful contractor. Does my question make since?

healthyhomes

You obviously have to make what you have to make to stay in business! My O&P markup is approx 50% and I have no problems staying in business. Granted, my business may be different than yours, but what's not different is the fact that we can both sit on our butts and go broke rather than working underpriced and going broke!