mtaylor said:
In a contract it states the following for changes in work:
In the absense of agreed upon unit prices and in accordance with the contract between <gc> and <customer>, the subcontractor's allowed markup for changes is 10% OH&P and the contractor's markup is 5% OH&P.
It appears that we have to calculate our overhead and charge 10% above overhead on labor and material, is this correct? I have never dealt with this type of contract and it appears that we would make very little money on this type of change order. Does anyone know the correct way to write up this type of change order?
Can you tell us a little more about the project? Is it a public project? Have you been awarded the job by the GC? Were these terms expressed to you in the bid documents or are they just part of the subcontract? If it is not a public project, and you were not informed expressly or through the bid documents, you do not have to accept these terms. If your Proposal states different terms, the contractor is actually making a counter offer to your Proposal and you don't have to accept it. Again, as long as this is not a public project, you can explain that a 10% OH&P is an unrealistic number. Most OH would be at least 20% and profit should be at least 10% if not double that.
Another way to boost the cost of a CO is, as jrannis said, account for every cost associated with the change. That is, supervision/foreman time from the moment the change is requested to the completion of billing for the CO. If you have a field office at the site, don't forget to include a $$ for that. include every bit of labor burden such as payroll taxes, health insurance, WC insurance, unemployment insurance, liability insurance (both the base premium and the amount per $100 of payroll), employee vacations and holidays, vehicle charge, vehicle insurance, material cost including tax, ect. Specifically, any expense that is related to personnell or equipment that is used for that change order is a direct job expense and not overhead. Of course you have to use amounts that are derived from the yearly expense of such equipment or expenses divided by the amount of time used in each change order.
Oh, and don't forget to request a time extension for each and every change order. It will be too late to ask for extra time after you have received 30 CO's and you need to work OT to complete the project on time. If after the first couple of changes, they don't approve a time extension, start calculating your labor on overtime rates, and only perform the changes after regular hours. One last point to make is to follow the letter of the contract regarding CO submission and approval. It only benefits the GC for you to work on a CO before it is approved. After the work is done, the value of that work becomes almost $0 to the GC. Submitt your requests and costs diligently and stand your ground when you are asked to perform the work before written approval. It is up to the GC and Owner to perform their jobs diligently and without delay. Remember....a screw up on their part does not make an emergency on your part!
good luck
(They don't need the break-down - just a price to 'agree' to.) Another might be the hourly rate for T&M = $250/hr. per man....:grin: If they "agree" - why not!?!