cost "plus" prices

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p51

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I just finished a job for a customer (restaraunt owner/gen. contractor).We installed wiring for a existing 45kw generator on roof of restaraunt,Including a 400 amp 3/0 transfer switch on roof with wiring for existing 400 amp service. I agreed to do this on a T&M basis with a 20% mark up on material @ the customers insistence which was below my usual mark up of 40-50%,I dont usually do T&M but times are slow so I agreed. Today I gave the cust. the bill for materialx1.20 and labor @ normal rate of $85 hr. for a lic. journeyman and $45 hr for a exp. helper (my cost $30 & 15 hr.). The contractor insists the 20% markup should include labor @ cost "plus" 20% my cut of this would be a whopping $9 dollars an hr. Has anyone ever run across this type of situation? I would like to get some feedback if possible before I reply to my customer Thanks
 
a lot of small GC's work this way; when they say "cost plus", they're only taking in that percentage of the job. So a $100k job would net them $20k. Usually your 1 man residential contractor works like this, but the percentages aren't near 20%.
 
If you do T+M (or cost plus) work you need to define what it means up front.

Most of the time I have seen a fixed rate for labor, and parts at actual cost plus 15% (sometimes more, never seen less than 15%).

Sometimes the contractor is required to provide documentation of these charges as well, via time sheets and invoices, when the bill is presented. Most often only if there is a dispute over the total.

I will tell you a story that will make all of you ill. One of our customers accepted the low bid of an EC that they had never done work with before. It was not so low that it was not doable, but it was low. The job has been a mess from day one. Weather related problems forced massive amounts of unrecoverable OT.

EC presented large number of change orders late in the game. I heard the site super for our customer discussing it with his PM. The EC was submitting change orders far in excess of anything remotely reasonable for the changes, and often settling for 10 or 15% of what they submitted.

Rumor had it that the EC was half a million bucks in the hole on the project.
 
p51 said:
...I agreed to do this on a T&M basis with a 20% mark up on material @ the customers insistence which was below my usual mark up of 40-50%,I dont usually do T&M but times are slow so I agreed. ....
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Cost + 20%, I hear alot of contractors and EC's around here on are on board for smaller jobs around my area.... Seems more like a mess and a bad handicapped application for an EC.

I can almost see the answers in the third and fourth replys, but what is the clear answer? Seems this all has to be understood by all parties involved.

Frankly I didn't think that T&M should be mixed in with Cost + 20%, whats with that? If it is involved sure that's compounding the cost, No ?
The contractor insists the 20% markup should include labor @ cost "plus" 20% my cut of this would be a whopping $9 dollars an hr. ....
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If you cost is 85 /hr, yeah you should be billing 102 /hr, if thats your thought then yes your getting shorted.

I know, yet more reading is required for me to get in this dogfight, but what I think are unlike terms are being used here and incorrectly woven in.
 
p51 said:
I just finished a job for a customer (restaraunt owner/gen. contractor).We installed wiring for a existing 45kw generator on roof of restaraunt,Including a 400 amp 3/0 transfer switch on roof with wiring for existing 400 amp service. I agreed to do this on a T&M basis with a 20% mark up on material @ the customers insistence which was below my usual mark up of 40-50%,I dont usually do T&M but times are slow so I agreed. Today I gave the cust. the bill for materialx1.20 and labor @ normal rate of $85 hr. for a lic. journeyman and $45 hr for a exp. helper (my cost $30 & 15 hr.). The contractor insists the 20% markup should include labor @ cost "plus" 20% my cut of this would be a whopping $9 dollars an hr. Has anyone ever run across this type of situation? I would like to get some feedback if possible before I reply to my customer Thanks
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When I do T/M.I present the numbers to the client in the form of a quote. That way its written down the material mark up rate and the labor rates.
I will except a verbal "OK" if it's under 5k or so, and I dont seem to have any worries, otherwise it has to be signed......

BUT Sounds like you have fallen prey to the "Hatchet Man" These type of people want to drive a Caddy and want you to ride a bicylce. They dont care about anyone but themselves.
 
Haven't done exactly cost plus.

Have dont T&M. Telling the customer that we will bill 25% over material price. They have not had a problem with it. I charge $68 for Licensed Journeyman and $45 for Experienced Apprentice.
This covers my J-man cost, and my Apprentice cost, + all insurances and government stuff.

Letting them know everything can be costly. They don't need to know the labor rate. Most of the people I deal with don't know that the company they work for has to actually pay for their benefits package... is that in the 20%? For me, I charge above and beyond all that.

Fixed labor rate. Fixed % above material cost.
They call whenever they want.
Sometimes we provide work on Saturday, but mostly M-F.


Apprentice gets good experience in a good setting.
Journeyman gets good help.
I (hopefully) make a few bucks.
They (hopefully) pay on time.
 
p51 said:
I just finished a job for a customer (restaraunt owner/gen. contractor).We installed wiring for a existing 45kw generator on roof of restaraunt,Including a 400 amp 3/0 transfer switch on roof with wiring for existing 400 amp service. I agreed to do this on a T&M basis with a 20% mark up on material @ the customers insistence which was below my usual mark up of 40-50%,I dont usually do T&M but times are slow so I agreed. Today I gave the cust. the bill for materialx1.20 and labor @ normal rate of $85 hr. for a lic. journeyman and $45 hr for a exp. helper (my cost $30 & 15 hr.). The contractor insists the 20% markup should include labor @ cost "plus" 20% my cut of this would be a whopping $9 dollars an hr. Has anyone ever run across this type of situation? I would like to get some feedback if possible before I reply to my customer Thanks
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well, it's TIME and MATERIAL, not COST and MATERIAL.

your whole reason to be there is to sell skilled labor, and provide material
for the skilled labor to install, and to make a living doing that. you have
an hourly shop rate, right? not an hourly shop cost.....

what part did you have in writing? i've done this stuff on verbal, and
regretted it. sounds like you have a bs artist just trying to chisel you.

nobody does what he's asking you to do. not me, and if you are smart,
not you.

i did some work for a machine tool broker years ago... when i presented
the bill, he chiseled me to knock 10% off the total bill. i was new, and
got suckered. after he'd written me the check, then he told me what he
had sold my labor for, with a grin, rubbing it in.

i did work for him for two more years, and EVERY bill i submitted to him
had a "correction factor" applied. it was the amount i had discounted
the first bill, applied to every single bill thereafter.

i have seen PPE for electricians, never for a doormat. if you use PPE,
you aren't a doormat.


randy
 
sounds like cost minus to me. The 20 points on labor, what the hell is that all about. that barely covers ins. the markup on material is for replacments and warranty or returns. the only money you make is the very little you are trying to squeeze out in the billing rate. which in my book is very low.
 
wireguru said:
cost + 20% on labor wouldnt even cover your workers comp.....
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it should...if you are doing a COST+ contract, you better figure in ALL your costs, including WC, benefits, etc....the 20% should be profit only....
 
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