[Office Girl]

Hi All-

I am not a contractor, but I have worked for a concrete contractor for 3 last years as his Office Mgr. We are located on the Central Coast of California. My question is this:

When billing for a Time & Material project what would be the proper percentage to charge for profit & overhead?

We don't do alot of T&M, but I get complaints from customer's when they recieve their invoice, saying they've been over charged. Material are constantly going up in this state, and my boss is forced to adjust his P & O as a result. So,if there are any contractor's from California in this forum who are having the same problem, I would certainly appreciate your comments.

Thanks,
Denise

 

[Grumpy]

10-15% on materials Only you can know your hourly rate, and you should tell them what you plan to charge per hour upfront. For roofing & siding we charge $55 minimum. Some guys charge more or less.

What ever you would figure your profit and overhead on a large bid job, you should figure the same percentage OR MORE on a T&M. Typically 30% or more.

 

[ProWallGuy]

Yeah, I agree with Grump, same as usual or a little more.

 

[hatchet]

Here's another way to look at this - don't shoot me just think about it..
I wouldn't punish the owner by putting an additional markup on T&M work - the subcontractor/contractor is getting off easier IMO. You're guaranteed to be paid for however long it takes plus materials plus a markup on the materials. Compare that to a hard bid job - now it's turned around. The contractor/subcontractor is taking the risk and guaranteeing to the client that they can perform the work for that price. If the contractor goes over on that - too bad. There is a small offset in the hard bid job if you go under the labor allowed.
But I personally like guaranteed payment for all work done. So why punish them for it? I'd be giving them a break and asking to do more T&M work.

 

[Spectatorz]

I agree more with Mr. Hatchet and his way of looking at the situation. Let me say this much: If Time and Materials is what the customer agrees to pay, when the bill is presented that is what should be charged.
Is it just assumed the customer is aware of the charges on Profit and Overhead being added ? Thats generally not the case.
If a contractor chooses to include Profit and Overhead in the estimated cost of the project, it should be presented at the signing of the contract as the actual hourly rate so there will be no misunderstandings on the representation of Time cost. Period.
No Explanation Needed. Be Fair and Honest. The Rate is The Rate.

 

[Grumpy]

The contractor/subcontractor is taking the risk and guaranteeing to the client that they can perform the work for that price. If the contractor goes over on that - too bad.

Which is exactly why T&M is Gold and which is why I always bid high and also which is why I do less and less new construction builders just cant afford me.

I said charge more for T&M for these reasons:
1) A t&m job is usually one man in one truck, a bid job is usually 4 men in one truck. There is added overhead in a t&m job.
2) Nobody pays a t&m driver to go from job to job and usually a service man can do 2 or 3 t&m jobs a day.
3) t&m jobs are usually tiny jobs, repair this and fix that, at that level of work there is always a little room for padding.
4) Undercutting yourself is a great way to put yourself out of business!

Charge more not less. We are professionals. If everyone charged more then even the lowest bidder would be making loot.

 

[hatchet]

1. That is probably true for roofing.
2. True - but I'm not talking about service - talking about T&M jobs.
3. True - but again I'm not talking about repairs - talking about T&M jobs.
4. I never mentioned under cutting - I mentioned charging the same O&P. Wage + Burdens + Overhead + Profit = hourly wage.
You call it being professional to jack prices up? I believe in doing a fair days work for a fair days pay.. nothing more and nothing less.

 

[Grumpy]

Why would you T&M anything other than a small easy in and out job? If you can't bid it... you probably shoudln't be installing it. No?

Yes I consider raising my price being professional. Being professional is asking enough money that you can A) do the job right and B) stay in business to service the warranty. There is MORE overhead involved in small jobs. 4 men can share a van in a large bid job. 1 or 2 men share a van in a small T&M job. 4 men share one or two ladders in a bid job. 1 or 2 men share one or two ladders in a T&M job. See my point? YOu have to charge more when you do small work, and going back to my first sentance of this post... Why would you T&M anything other than a small job?

 

[hatchet]

First off - I agree that O&P will increase on small jobs .. in fact I think I've posted that elsewhere. But I'm not talking about service, repair, or small jobs here and I don't believe the OP was either.
There are 1000 reasons and more for providing a T&M bid. Let me start by naming what I consider the top 5 reasons...
1. Drawings incomplete
2. Known conditions - but not the extent
3. Unknown materials
4. New products or methods of construction required
5. Service type contracts
Want to learn more about the true "Time and Materials" contract - read this
http://www.wifcon.com/analtandm2.doc it's geared towards government contracts but the same ideas are there.

 

[hatchet]

BTW - this is great stuff
I hope others come away with a better understanding of T&M - either way they see it.

 

[Grumpy]

Drawings incomplete? I provide my own spec accompanied with my bid.
I don't do a job unelss I know what materials I am going to use, written in the contract.
I said if you can't bid it you shoudn't install it. What I should have said is "If I can't bid it, I don't waste my time gambling. The casino is for that. My time is better spent chasing a sure thing."

 

[hatchet]

I agree with you 100% Grumpy - but only as far as a roofing scope (and some other scopes). By the time you get to a job the walls etc are pretty much set in stone - shouldn't be much of a question at all what the roof is going to look like.

 

[Grumpy]

I dont see how roofing varies from any other sub trade. Then again it just might be my own ignorancy to the other trades that makes me say that. Youd be suprised how many jobs Ive gotten to that looked nothing like the print I bidded, which is why I always hold onto a set of the prints... Or I have to go back to a job site because they decided to tear up part of the roof and install something not to print.

Nothing in new construction is ever set in stone.

Ort better yet, we get called out to install a roof and when I go to the site only part of the roof is even nframed, but they want me to waste my time drying in the roof. I write in all my bids that my crews wont come out to the site until the roof is entirely framed and finished fascia installed. I don't do puzzle work, a piece here a piece there. Call me when your ready or don't bother calling.

 

[Mike Finley]

Am I missing something here? When you bid time and materials isn't that 2 line items (Time), (Materials)? Is the poster asking to add another line item for (Profit & Overhead)??????

Doesn't Profit & Overhead get taken care of in (Time) when you are billing like this? Instead of charging $40 an hour for time you charge $43 an hour to cover your profit and overhead. I have got to be not understanding the question.

I mark up all materials a minimum of 15% no matter if I am coming up with a fixed price or if it is going to be time & materials. If I have to physically handle those materials or carry the cost of them during the build that costs more money than just the actual price of them.

 

[Grumpy]

Usually a small bit of profit is in the materials where it will say cost of materials plus 10%, and the rest of the profit and overhead is in the time. Usually the time figure is an upfront figure and your not just telling someone "I'll bill ya when I am done for what I think it's worth." This is when I give a T&M price.

When I give a bid price I don't see the point in marking up materials. It just complicated the math. Add up all your costs and mark up that sub total. Why mark up each line item seperately?

Example:

Labor + x%
Material + x%
Equipment rental/depreciation + x%

Why not just do this...

(Labor + Material + all overhead) + x% = Customer's price

Same result but my method just seems a whole lot easier!

 

[hatchet]

Yep like Grumpy said - all direct labor costs, indirect labor costs, and profit should be included in the hourly wage. And I also agree on the way Grumpy does the markups all inclusive.
The only time I find it easier to split the percentages to the line items is if I'm front loading a bid with unit prices. Government work asks for unit prices all the time. But they don't allow you any mobilization costs so we front load the bid to recuperate some of mobilization costs.