just wondering what percetage general contractors normally make on a sub contractor? I've been doing some land scaping and will be subing out some interlocing brick work.I don't want to rip any body off but my time to research and get a reputable person to do the job, as well as pay them up front for their work must be worth something. thanks in advance
A GC has to find and research a quality sub, pay, manage and ultimately warranty this subs work because if the sub goes bust or won't warranty their work, you are holding the bag. When you pay a sub before you are paid, you are also financing the project and should get paid for using your money. A GC or a sub with sub-subcontractors should be compensated for all of this. I try to get close to what my profit margin for the job is for self-performed work on any subcontract work. I have been a GC, subcontractor and a sub-subcontractor. It's all about the risk involved and the amount of compensation associated with the risk. For example, I'll use a large landscape project. There is more risk involved with sub'ing out a retaining wall due to the engineering, quality control, long-term performance, etc than sub'ing out sod installation. There should be a larger margin on the retaining wall work than laying sod.
used to get 10% now they say they would be happy to get 3%
Very good responses by all. 3% is generally what we mark up subs, but that all depends on the type of work and for all the reasons CM1995 said.
Around here the gcs are on to the mark up and beat down the sub tactic. They take your bid, mark it up for their bid. Then when they get awarded the project, they like to come back and beat you up. Your bid was 10,900, but we have someone willing to do it for 10,000. If you do it for 10,000 we will give you the project. They then pad their books with that 900. Slowly but surely, guys are catching on, and not playing ball. I cant see paying to work, or working off of volume instead of profit.
Thank you for all the responses. What are you guys marking up your materials?
I think we use 3% for materials as well.
It all depends upon the economy. Currently I have been getting 10% as a builder. 6-7 years ago when the economy was good I was getting 20%. As far a beating up the subs - well that's just plain wrong! I have had jobs where the subs have been my profit! There have been times when I have given by subs bonuses for going above and beyond. I have asked subs to lower their price - but only when I have needed to lower the price of the job to get it - and only after I have reduced my profit margin. John
boy around here that just wouldnt be tolerated, completely unethical business practice. if you are low bidder you get the work(most cases). can you imagine dealing with someone like that, that gc is just in it for themselves. as soon as an issue arises on any job that gc will also not support you either.......you no its what we learned in kindergarden everybody lets work together from the owner/client to the gc to the subs-lets get the job done efficiently, on time and we all make a lil money and move on to the next one ......sorry got side tracked but markup should be 10%
Unfortunately their are quite a few GC's like Turbo describes out there, I have worked for a few. The commercial restaurant and hotel chain builders seem to all be that way. If you decide to work for these "traveling circuses", do so with care. It's not so much a matter of not getting paid but rather being beat to the bottom dollar during the bidding stage, having to fight for every legit change order and waiting 180 days + to get retainage. There is one low-budget extended stay hotel company (if anyone wants to know send me a PM) that includes an interesting lien-waiver requirement in their contract. EVERY subcontractor and supplier that worked on the job has to sign a standard lien release in order for ANY retainage to be paid to anyone. You can imagine how long this process could take. On the other hand, there are several chains (hotels, rest, gas stations) that have their own project managers and contract work themselves. There is one family-owned chain from MO that is a pleasure to work with. No BS on the work description, project management or payment.
Seems to me if you're bidding a job for a GC and that guy has a better bid, there must be a reason he doesn't take it. If he comes to you because he knows you do the work better or with less problems, you should be worth the extra money to know that it WILL be done right. The newest thing I have seen I call the clawback. They find a reason, usually contract based, to either make you do more work than you actually bid and not pay more for it or the try and find reasons to hold back your money. A company I worked for withheld money they had already signed off on that the work was done right until I agreed to throw out my extras bill. Watch your contract! 3%? On $100,000 dollar contract, you are going to profit $3,000? Good luck staying in business. Maybe on a $10,000,000 contract but I don't think I have ever heard of that either.
The markup of a sub is usually not done in a straight percentage, other than the insurance company costs. There will be one value for the sub having insurance and having the correct (as per insurance company) protocol for the named insureds and indemnifications; there will be another value for the sub who has no insurance. These numbers vary as to the type of task. The next item is the indirect management costs for the sub which includes some office time for the PM to obtain the signed contract and or bonding paperwork (this is usually a half day on a simple contract and maybe a couple three days on a complex contract). The duration of the subs work involves the office managers time to collect and obtain and cross check the certified payroll to the records kept by the jobsite super, that amounts to about 1 to 2 hours per week for a small crew to about a half a day per week for a big crew. Reviewing a preparing the monthly invoices for submittal to the agency, and verifying percent completion, and the retainage amount to about another half a day per sub for the office manager and about an hour or two for the PM (sometimes more if the sub need to have more cash flow to keep materials coming). The office manager has to collect other documents such as workers comp, license & license bond, address verification, vehicle insurance. These usually we feel add up to about 2/3 day of calling and then checking off the submittals from the source (no copies allowed from the sub). You get the idea - these office "fees" are added up during the estimating process and assigned to each sub category for the expected length they would be on the job. After these numbers are totaled, they are added onto the estimators spreadsheet. There is no logical reason to do a percentage other than to muse over the variation of the amount. If you do enough estimates and enough jobs with the same folks, you can pin these cost(s) down quite nicely. We learned a while ago, we tried to do percentages & when we did so, we always lose the bid, or if we get it, donate too much time to the job. If we add up these costs as close as we can see them to actually be, then our bids come in either number one or two, sometimes third - but only third if somebody zooms in there with a low number and a scratch pad. * As to the insurance and or the danger of a job going badly, there isn't enough money in any one's markup to cover the wall falling down, or a a pipe break, etc. These items are self insured, for at least the deductible of the policies, and then if necessary a claim would be filed. Since the job cost likely includes the supervision / quality control surveillance (which is different than QC Testing), adding for possible dilemmas will make you lose the bid (IMHO). The first time a sub makes a mistake on a layout and doesn't get caught by the GC's Supe or PM, but does get caught by the owners rep AND this holds up an entire invoice, you learn quickly these folks don't care about the possible, only the actual: Look at the two this way: (a) sod is off by one foot, or (b) a retaining wall could fall over. The sod being off is measurable; the wall maybe falling over is hypothetical. The example job mentioned above that is more complicated may very well burn up more time and indeed there is the warranty factor. * There's some other things that come to mind such as trash hauling, but usually that is part of the job and not necessarily directly assigned to the sub although the concrete sub can generate a mess with truck and pump cleanouts and form wastage, the carpenters & rodbusters can make a pile too, thus certain trades may need a special 'adder' in this category. * The last strategy is a factor for the 'ambiguity of the plans'. Here is where the boss who is the one to write the final numbers down may add or subtract some amount and it is sometimes a percentage while other times it is a some number they assign in their head. * Hopefully, I have given some reasons to not use a percentage per se but try to come up with real tangible numbers for the cost of managed subcontracted work. Those insurance numbers are a bit tricky to pry out of the insurance company but they will be real and on the invoice after they complete their audit. Some we were able to ask for, others we had to guess at and then we learned the values. When the volumes were up, these numbers were impossible to negotiate, now that we (1) have a record of the charges over the years and (2) things are slower, we can suggest (beg) a revision to the billing. All the best. The above discussion is for a straight arrangement where there is no 'scheming' to get an upper hand on someone - I tried to list some examples to help in the analysis of hiring a subcontractor and not losing money (eg what IS the true cost)
I agree with everything you said, Oceano, and you had all the costs down but I think the question was what is your markup for profit for providing that service. The companies I work for (if I'm not the General), make me provide my own insurance and name them as additionally insured. But what is your profit markup for the service and carrying the sub? I read some things here and scratch my head because, unless the Client is extremely late (months), I never get my draw (or partial) until the check has been cashed by the GC or Prime.
In the past state and local governenments would allow a mark-up of 15% for extra work orders . Typically when I was bidding contract work for highway's I would use 15-20% but it depends on how you are getting paid.
GOOD customer GOOD sub 10% Any other customer pays 15% - 18% for the hassle.
Hey guys! I'm new on here and sorry I posted on this because it wont let me put new threads up. Anyone know why and if you do can you tell me why and how to fix it?
Welcome to the Forums Logger123. Here at HEF, we require new members to make 3 posts in existing threads before they can start new threads. This helps keep the spam out of the forum. You have made your 3 posts, so you should be able to start your own thread. If you would like to read further into introductory thread posting, click on the link in my signature. Welcome!:drinkup
Not to hijack, but, I never realized that smart remark about punctuation was a link. I actually learned something.
Better off at Walmart as a greeter than 3% profit on a sub. If you can't make 10% forget about it. May be a few points less if you are doing millions and millions in work. 3% and one bad sub you may be subbing for a long time to eat the difference. I am a masonry sub commercial and if I can't get 15-17% after material, equipment cost per day, and labor they can keep the job. GC's around here usually make near 10%. No clue now they way pricing is. The job you are talking about you better know the sub and the job. Small scale job like that I would add 15-20% After bidding and construction commercial masonry projects for myself since 1978 I am now getting beat by 30-40% on prevailing wage jobs. Nuts out there now with one mason 360 and then 4 in the 600-620,000 range for a small masonry firehouse contract for the brick, stone, and block.