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Small-Job Versus Large-Job Markup (Part II)

Each job, regardless of the size, will have a number of steps
involved from beginning to end … What I want you to see is
the impact that the small job has on the direct overhead cost.
The steps and associated costs for a small project are identified
and outlined below:



Have an estimator (or someone) pick up the plans ……$50.00

Visit the job site to verify existing conditions ………..200.00

Takeoff and estimate the job ……………………175.00

Write the proposal …………………………….25.00

Set up budget for job ………………………….25.00

Prepare (and place)material order …………………25.00

Deliver toolbox and scaffold (driver time and vehicle cost) 200.00

Superintendent visits the job in progress
(assume two visits)………………………..200.00

Pick up toolbox and scaffold to return to warehouse
(end of the job)…………………………..200.00

Prepare and send out the invoice ………………….50.00

Total …………………………….$1,150.00



But there are other (indirect) overhead costs that need to be
applied. Payroll preparation, cost accounting, general accounting,
office lease, utilities, phone and depreciation are some of the
other items that would make up the overhead cost of your company.



A budget for a $20,000 drywall job might look like this:



Labor (including cleanup)………………………$7,000

Labor burden (T &I)………………………….2,100

Material (including sales tax)…………………….8,142

Cost ……………………………………..17,242

16 %markup ……………………………….2,758

Contract Amount ………………………$20,000



With an approximate (direct) overhead cost of $1,150, the above
10 steps are almost 6 percent of the contract amount.



Let’s look at a $100,000 drywall project. We will use the 10 steps
(as above) to identify the direct overhead cost, but this job will
have a longer duration, maybe six weeks, where the small job
would be one and a half to two weeks.



Have someone pick up the plans …………………$50.00

Verify existing conditions of the job ……………….200.00

Takeoff and estimate the project ………………….275.00

Write proposal ………………………………25.00

Set up budget for job ………………………….50.00

Prepare (and place)material order ………………..50.00

Deliver toolbox and scaffold …………………….300.00

Superintendent visits the job in progress
(assume one per week for six weeks)……………600.00

Pick up toolbox and scaffolds to return to warehouse
(end of job)………………………………300.00

Prepare and send out two invoices ……………….100.00

Total ……………………………$1,950.00



A budget for a $100,000 drywall job might look like this:



Labor (including cleanup)……………………..$35,000

Labor burden (T&l)…………………………..I 0,500

Material (including sales tax)……………………40,707

Cost …………………………………….86,207

16%markup ……………………………….13,793

Contract Amount ……………………..$100,000



With an approximate (direct) overhead cost of $1,800, the above
10 steps are almost 2 percent of this contract amount.



A job that is even larger will take on some added cost of project
management, which the previous examples did not require. For
this example, we will use $1 million as a contract amount.



Pick up the plans from the contractor ……………..$50.00

Takeoff and estimate the project …………………900.00

Write the proposal …………………………….25.00

Set up budget for job …………………………150.00

Take field measurements
(check out accessibility for deliveries)……………250.00

Prepare (and place)material order ……………….150.00

Deliver toolboxes and scaffolds
(assume job is several floors)…………………400.00

Superintendent visits the job in progress
(assume two per week for 25 weeks)………….5,000.00

Project manager

Payroll preparation,(assume one full day per week for 25 weeks)…….6,000.00

Pick up toolboxes and scaffolds to return to warehouse
(end of job)……………………………400.00

Prepare and send out six invoices(more detailed for larger job)………………….450.00

Total ………………………………….$13,775.00




On a $1 million project,the direct overhead cost as shown is
depreciation are some of the $13,775 and is equal to just over 1 percent of this contract
amount.




The budget for a $1 million project might look like this:



Labor (including cleanup)……………………$350,000

Labor burden (T &I)…………………………105,000

Material (including sales tax)…………………..407,000

Cost …………………………………….862,000

16 percent markup ………………………….138,000

Contract Amount ………………………..$1,000,000



From these three illustrations, you can see that the (direct) over-
head for the small job is much greater (by percentage)than
the larger job. As the size of the job decreases, the percentage
you use in your estimate for markup must go up.






About the Author

Charles Mahaffey is president of Accuest, LLC, Marietta, Ga.
Accuest provides estimating and consulting services for commercial drywall subcontractors.

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