Want to talk about O/P on subcontractor work.
I'm working on bids for a couple of projects that would be at the top end of what we could safely handle, and we'll need to use subs for some of the work like FA and lightning protection systems. I've kept my pricing for as much of the LV as possible in-house.
One project has about $400k in subcontractor work. On certain projects in the past I've gone with our full profit margin on top of their quotes and got the job, but on these jobs in particular, based on previous experience, I know if I do that I'll be too high as I have to assume I'm also competing against larger EC's that keep everything in-house. We have one local, for example, that will probably bid against me on one of these jobs and they have a division for everything. They also turn about 10x the volume we do.
I could make up some random number to put on it like 5% or so, but is there a better approach at determining what my actual margins should be on sub work?
In theory it should be mostly hands-off, but in reality, there are times we end up doing some financing on jobs where we have to keep the subs paid while waiting on a check from the GC. And while that shouldn't happen, sometimes it does. There's always some logistical work on my end as well in coordinating with subs, and we obviously need to compensate ourselves for that.
My head says that in the end, I'm not doing the work or buying the material, so if I just put say 5% profit on it, it's just extra money in the bank, and I'm still competitive and will make money off the work we're actually doing. But my gut says it's too little money for the effort involved, and for the challenges I think we could face by not being fully in control of every aspect of our contract.
I think in the end I'm just feeling out what other guys are doing to see what the market norms are.
Any thoughts are appreciated.
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