Unbelievable bids.

Status
Not open for further replies.

Strife

Senior Member
I know times are tough, but it just blows my mind....
Just came back from an opening bids for electrical work for a city we did work for last 10 years.
The bid request was set like this:
Price 1,500 hrs of work @ equal total.
Price 40 hrs of OT @ equal total
Price $ 8,000.00 material cost @ plus profit, overhead, etc, equal total.
No travelling allowed.

I had my bid at 95K which was basically unchanged for what we had 10 years ago.

Now, most of this work will be 1-20hrs deals, as for anything over 5K value or so they'll go for a competitive bid.
I just couldn't believe as about 4 bids were at 60K.
I mean that's about $ 34/hr with 10% profit. How does anyone think they can make any money, or even break even at those rates?
I mean keep in mind, these are basically service calls of mostly 1-5 hrs. I know handy men who charge more than that without a license, insurance, anything. Heck, I wouldn't moonlight for less than $30.00/hr
On the bright side, there were 5-6 more than me and 3-4 around my bid, so least I know I'm still competitive with the serious companies. And I know the city is not stupid enough to award to those 60K bids, but it still make me wonder.
 

sameguy

Senior Member
Location
New York
Occupation
Master Elec./JW retired
yes they are and they will. Then they will pay the extras that the rest had in the bid. Happens all the time.
 

DaveBowden

Senior Member
Location
St Petersburg FL
Same thing just happened to me on a bid for a new house. I was at $13250. Another guy was at $12640 but he didn't include 5 wrap around flo lights, 3 under cabinet flo lights and 2 motion sensor lights. I figured we were within a few bucks of each other.
Last guy came in at $9000 including the fixtures I listed above. Works out to about $55 an opening with a new 200 amp service and done to 2008 codes. AFI breakers, tamper proof recepts, smoke/CO detectors and all.
The builder says "Well he must need the work and he's been around a long time"
I've been in business for 27 years and need the work too, but not if its just for practice.
 

wireguy8169

Senior Member
Location
Southern Maine
Wow, its funny this post came up (well not funny but you know what I mean). Anyhow, got a call from a real estate company that a friend of mine gave my contact now that I am liscensed and insure, well while speaking to the office manager or whatever he was things sounded great. Then at the close of the converstation (we did not talk about pricing for him) he said "oh and I would be happy to give your name to my GC's if they need someone, what should I tell them $15-20 an hour". I just answered with give them my contact and I can discuss rates with them dependent on the jobs.

I was thinking huh...you want me to use my liscense and insurance for that, I would maybe do just residential work for $20 an hr but just doing the dumb end of stuff not all the stuff he was talking. Just made me realize how some folks really do not know whats involved. Sorry if I hijacked but on topic, I would rather just work for someone and get a salary than give my services away as a contractor and go broke...
 
I only do small jobs but I price many jobs that the customer can't seem to get done--just to get someone to show up--which in this economy is unbelievable to me at least. I've said it here before--I do an awful big volume of work that involves redoing or repairing the work of those $15 or $20 guys. I have little overhead (it's just me) and I figure my break even is $29/hour--that's no profit in my mind although it actually is. The market here is $50 to $60 on commercial but I do a lot of rural/farm stuff and that market will not bear those rates. When I give a price to a customer for a specific job I can tell right away what they got from others. Most are savvy enough to know if a low price will even show up or wonder what kind of quality they will get. I guess what I'm trying to say is that the price someone gets that's half of mine results in work at some point down the road for me it seems.
 

ksmith846

Senior Member
Granted I am not in your market, but I can see it go in the $60K range based off of my own costs and your takeoff totals.

1500 hours @ $32.00 (labor with burden and overhead) breakeven pricing
40 hours OT @ $56.00 (same as above)
Materials $8000

Total costs with overhead included = $58,240 plus 10% profit = $64,064

Granted I would love to be able to charge more than that. But realistically in my market I cannot even get a job at that price lately. Always seems to be some other contractor that is willing to do it for nothing. When will it end??:confused:
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
Granted I would love to be able to charge more than that. But realistically in my market I cannot even get a job at that price lately. Always seems to be some other contractor that is willing to do it for nothing. When will it end??:confused:

It will end when the over supply of electrical contractors relative to the demand for those services evens out.
 

growler

Senior Member
Location
Atlanta,GA
I mean that's about $ 34/hr with 10% profit. How does anyone think they can make any money, or even break even at those rates?
I mean keep in mind, these are basically service calls of mostly 1-5 hrs.

Granted I am not in your market, but I can see it go in the $60K range based off of my own costs and your takeoff totals.

1500 hours @ $32.00 (labor with burden and overhead) breakeven pricing
40 hours OT @ $56.00 (same as above)
Materials $8000

Total costs with overhead included = $58,240 plus 10% profit = $64,064


This is probably how those low bidder were figuring it out. They were calculating service calls at their very minimum construction rates and that's not going to work out very well for them.

One of the things that happens during bad economic periods is that companies venture into unfamiliar areas of work.
 

ksmith846

Senior Member
FYI...I totally missed on the "Service call" part.......

Now understanding what you were referring to......

1500 @ $50 = $75,000

40 @ $75 = $3000

$8000

Total $86,000 plus 10% = $94,600

So I agree that the other low #'s were definitley provided by someone lacking experience in quoting that type of work or at least not quoting as service calls, but at construction pricing. I do mainly new construction quotes.
 

cowboyjwc

Moderator
Staff member
Location
Simi Valley, CA
This is probably how those low bidder were figuring it out. They were calculating service calls at their very minimum construction rates and that's not going to work out very well for them.

One of the things that happens during bad economic periods is that companies venture into unfamiliar areas of work.

You are right about the unfamiliar areas of work. We've seen many the resi guy try to dabble in commercial or even multi-family and just take it in the shorts.

As for the low bid on the city project they will take it as they are required by law to take it. We have a guy that usually runs the bigger city projects and there will be no extras. We gave you the plans and specs and that's what you were to bid to. If you missed it or didn't include it, oh well.
 

cdslotz

Senior Member
Granted I am not in your market, but I can see it go in the $60K range based off of my own costs and your takeoff totals.

1500 hours @ $32.00 (labor with burden and overhead) breakeven pricing
40 hours OT @ $56.00 (same as above)
Materials $8000

Total costs with overhead included = $58,240 plus 10% profit = $64,064

Granted I would love to be able to charge more than that. But realistically in my market I cannot even get a job at that price lately. Always seems to be some other contractor that is willing to do it for nothing. When will it end??

This looks about right. If your bidding construction rates, which is the way I've done for decades, you use your average shop rate. Ours runs around $19.50 to $20.00/hr
Unbelievable????? Not at all
 
Last edited:

Strife

Senior Member
And the half hour travelling you can not charge? And the overhead on material? And warranty? And the fact this is a contract for a city, not Joe Blow who doesn't know better if you cut a corner here and there? And the van insurance? and the gas? Not sure what market you're on, but here Gas is around $ 3.00 a gallon so even going 10 miles it's 3 dollars with a van.

Granted I am not in your market, but I can see it go in the $60K range based off of my own costs and your takeoff totals.

1500 hours @ $32.00 (labor with burden and overhead) breakeven pricing
40 hours OT @ $56.00 (same as above)
Materials $8000

Total costs with overhead included = $58,240 plus 10% profit = $64,064

Granted I would love to be able to charge more than that. But realistically in my market I cannot even get a job at that price lately. Always seems to be some other contractor that is willing to do it for nothing. When will it end??:confused:
 

flyboy

Member
Location
Planet Earth
I was thinking huh...you want me to use my liscense and insurance for that, I would maybe do just residential work for $20 an hr but just doing the dumb end of stuff not all the stuff he was talking.

I have little overhead (it's just me) and I figure my break even is $29/hour--that's no profit in my mind although it actually is.

1500 hours @ $32.00 (labor with burden and overhead) breakeven pricing

This looks about right. If your bidding construction rates, which is the way I've done for decades, you use your average shop rate. Ours runs around $19.50 to $20.00/hr

Is it any wonder why this business is filled with low balling, bottom feeding competitors?

These comments clearly prove that the majority (not all, but the majority) of contractors don't have a clue what "breakeven" is. They are the same contractors that will complain about low bidders and that prices in their market are the reason why they can't make any money. They are the ones that make comments like "you can't get those prices where I'm from". They don't seem to ever put together the fact that they are the problem, that their inability to understand the "numbers" is the reason why prices are so low.

So, here it is, once again, how you determine what your breakeven is. For those of you who will find it irresistible to make stupid unfounded statements like "that isn't the only way to find out how to charge" I say to you...yes, it is!

Please, for the sake of those who actually want to be paid what we are worth, get out of the business; get a hot dog wagon and find yourselves a busy corner. You'll make more money and those of us who actually know how to run a business can raise the bar in our beloved industry.

Flame suit on!

Here's a formula to figure your selling price for a one truck operation (you in the truck, no employees):

Copy and paste this into Word, Excel or program of choice.

Note: This formula is for residential/light commercial service work (no new construction) using flat rate pricing.

Billable Hour: A billable hour is the actual time during the workday when income is produced. FACT: Your total billable hours for one year will not exceed 1,000 hours.
4 (hours a day) x 5 (days a week) x 50 (weeks) = 1,000 hours/yr.
Total Billable Hours/Year: 1,000 Hrs. Don?t make this higher, it very accurate (unless your doing larger bid and spec projects, then use 6 hours a day).

Selling Price:This is the hourly amount you must charge as the labor component of your flat rate pricing. It does not include material. Include material in your flat rate pricing and mark it up whatever amount you desire (or not). You?re really selling your labor, so if you sell your parts & equipment at cost (including freight & taxes) it really doesn?t matter. What matters is selling your billable labor hour. Here?s how to calculate the selling price.

OVERHEAD ITEMS: Fill in amounts and total it on line 36.

A word about owner?s salary: Consider what you could be paid in a year if you worked for a reputable company, that pays what you are worth, as a tradesman and offers a bonus based on performance. It is not uncommon for some to earn upwards of 70-80,000/yr. or more. Do not sell yourself short, even in the first year of business. As a business owner you should pay yourself at least 80k/yr and more like 100k/yr. treat your salary as a business expense.

1. Owner?s Salary __________________
2. Advertising - YP ___________________
3. Advertising ? Other ___________________
4. Answering Service ___________________
5. Bad Dept ___________________
6. Bank Charges ___________________
7. C.P.A. ___________________
8. Call Backs ___________________
9. Cellular Phone ___________________
10. Computer Expense ___________________
11. Credit Card Fees ___________________
12. Donations ___________________
13. Dues/Subscriptions ___________________
14. Educational Expense __________________
15. Gasoline Expense __________________
16. Health Insurance ___________________
17. Insurance ? Truck ___________________
18. Insurance ? Contractors ________________
19. Insurance ? Umbrella __________________
20. Insurance ? Workers Comp ______________
21. Legal Expense ___________________
22. Office Supplies ___________________
23. Payroll Company ___________________
24. Payroll Burden ___________________
25. Postage Expense __________________
26. Rent & Taxes ___________________
27. Retirement/401k ___________________
28. Telephone ___________________
29. Tool Repair/Replace ____________________
30. Travel & Entertain ____________________
31. Truck Expense ___________________
32. Truck Maintenance ____________________
33. Unforeseen Items ____________________
34. Uniform Service _____________________
35. Utilities _____________________

36. Total Yearly Expenses ___________________

37. Expenses Divided by 1,000 B/H = _____________ (This is your break even (B/E) price ?
NO PROFIT!

20% PROFIT ON TOP OF BREAK EVEN COST: This is a standard acceptable profit, please don?t short change yourself. Enter the breakeven number from above and divide by .80 to get your selling price.

__________________Divided by .80 = CORRECT Selling Price Of______________/hour
Enter break even number here
B/E Cost = 80% Of Selling Price


The above list of expenses is only a representation of expenses and may not include all expenses. Be sure to add any and all additional expenses you may incur.
 

cdslotz

Senior Member
Is it any wonder why this business is filled with low balling, bottom feeding competitors?

These comments clearly prove that the majority (not all, but the majority) of contractors don't have a clue what "breakeven" is.

I know exactly what my breakeven is. It's in my burden and overhead markup. My shop labor rate is raw cost. My final markup is based on risk for that particular job
 

ZZDoug

Member
Location
North Dakota
use your average shop rate. Ours runs around $19.50 to $20.00/hr
Unbelievable?????

Well yes it is unbelievable. When you figure in taxes, workmans comp, health insurance, liability, payroll cost, and various other legit contractors expenses, you must be paying your people less than $10 hr. Where do you find licensed electricians for minimum wage? Inquiring minds would like to know!
 

flyboy

Member
Location
Planet Earth
I know exactly what my breakeven is. It's in my burden and overhead markup. My shop labor rate is raw cost. My final markup is based on risk for that particular job

Your breakeven is the total of all your fixed and variable costs, which includes your salary. It is not a "markup". It's your total cost of doing business before profit.

Let's break it down:

Overhead is all the expenses associated with running a business, irrespective of the product or service you offer. In other words, overhead are those expenses that want to be paid whether you have a job or not. Rent, insurance, truck payments, gas, tools, workers compensation, office salaries, office supplies, etc.

Cost of goods or cost of sales are those expenses you incur when you have a job, such as labor, materials & equipment, permits, sub-contractors.

On an income statement, cost of goods is above the line, overhead is below the line and profit is the bottom line.

Your final "mark up", as you call it, is profit. Profit is what you are supposed to make because of the risk you take for being in business. It's the ROI (return on investment) you make for taking that risk of being in business.

You have to know what your overhead is in order to know what to "bid" that big job you want to get. If you "bid" on the job that gives you a 40% gross margin, do you have enough to pay overhead and still have a reasonable profit?

You must know your true costs of doing business in order to make money in business. If you?re not making money (profit) then all you have is a job, not a business.
 

flyboy

Member
Location
Planet Earth
Well yes it is unbelievable. When you figure in taxes, workmans comp, health insurance, liability, payroll cost, and various other legit contractors expenses, you must be paying your people less than $10 hr. Where do you find licensed electricians for minimum wage? Inquiring minds would like to know!

Mexico, maybe?
 

iwire

Moderator
Staff member
Location
Massachusetts
You claim that $10/hr licensed electricians exist in the US? Please, do tell us where in the US this would be.

You got me, I cannot so maybe they do or maybe they do not exist.


But we are not going to go down that road here, please stay on topic.
 
Status
Not open for further replies.
Top