Thread: Construction Pricing

In AUS, I would think that labour is closer to 50%

I would say at least 50% labour, more depending on the project. When labour costs are $100-150 an hour it's very hard for a project material costs to outstrip labour costs (unless your talking fast projects with expensive items).

The percentage depends on :
cost of materials (either everyday material or 1 off expensive or high end)
degree of difficulty
type of job
all new work or replication of existing (period/heritage/odd)
access to site (material handling/ "NO you cannot work on the balcony, work in the garage and carry everything up stairs)
Super fussy client that you know will give you grief about anything just so they think they know what they are talking about and you don't
availability of trades for the location of the job (think disparity pricing of suburbs by supermarkets)

Just a few of the variables

Originally Posted by rwbuild

Super fussy client that you know will give you grief about anything just so they think they know what they are talking about

This is a damn hard one to factor......

Had to have a laugh though as we are dealing with one of these at the moment - you've had a couple on your time ray?

Yes, had 2, I learnt that part of quoting for work is to spend time with the client and get inside their head so you understand their mindset, not just about the job but about their views on other life topics. It can save you valuable time and stress. I had a potential client who really wanted me to do the job but it didn't take long to work out that it wasn't going to end well, the contractor who did get the job regretted it big time.

Originally Posted by ian

In AUS, I would think that labour is closer to 50%

Ian,
My reference was about 15 years ago. It was also for major construction. e.g. Building a house or a major addition.

Once upon a time, it was possible to estimate jobs at 50-50. Those days are long gone as to are the tradesmen who continued in that practice. Today, the variables are greater, both in cost and magnitude. The client is far more savvy as to what is available and at what price. A few minutes on the Net and all is revealed. In days gone by, this information required time and lots of it.
Ray has touched on some of the vagaries that come into the fiasco called quoting. As for client difficulty being address by increase in price I feel it unfortunate that such methods have to be introduced. Client management is one of the skills required to be successful as a self employed tradesman. This is not to say there are no difficult clients, it is more how you handle them. There are those you wouldnt take on for any money. My personal aversion is the legal profession. I've seen too many blokes burned for no other reason than they can. A close friend was "shorted'' on a final payment on a job by 20k and was told if he didnt like it, to take it to court. The friend was suffering with cancer at the time but still endeavored to get paid. A frustrating, sole destroying exercise due to the clients constant applications for adjournments. The matter still hadn't been rectified at my friends time of death. Nice.

I agree
Client management is a skill
Some clients are very difficult to manage [emoji33]

Hmmm clients......when I was working (white board Cabinet making) the boss would nearly trip over himself if a possible client turned up in a Mercedes. My take on the whole scenario was that we were far better off to do small "bread and butter" kitchens for people who would pay (well nearly) for the kitchen even before we had finished installing it than doing a "high end" finicky, expensive kitchen. The majority of those customers would be very slow at finalising the invoice. Exposure to these types of customers was an eye opener. We had one bloke pay all but 10%. When we asked for the rest his answer was that he was holding back "just in case some thing went wrong". We chased him for some time to get that money.

I would never work for anyone who drove a mercedes, especially a black one. Also avoid as said lawyers, architects, politicians, reporters and other unsavory sorts. Most people in the world are really good (not just as clients but in general) but there is always a percentage of AH's, and they tend to gravitate to certain professions and lifestyle choices.

I am not a builder, nor cabinet maker. I was a mechanic once upon a time. We got abused weekly. Often the story would go: I bought this for $500 but it's making a noise, can you fix it ? It'll cost $1500. Your a rip off! How can you charge that to fix a $500 ... You didn't ask me before you bought it. This is why it was $500, they all have that problem... much swearing ensues... Engineering came with a different set of aggravations but I very much preferred it to the other jobs I've done.

I built a spreadsheet a few years back to owner build a house. I found for conventional construction labor was about double my materials costs. I don't understand the difference between labor and contractor in the OP. 2c

Originally Posted by damian

I built a spreadsheet a few years back to owner build a house. I found for conventional construction labor was about double my materials costs. I don't understand the difference between labor and contractor in the OP.

I'm thinking overhead and profit margin.

Some years ago, Leighton Holdings went on record to say that their expected profit margin was 20% of the total cost -- at the time one of Leighton's projects was valued at $4.8 BILLION, implying an expected profit of $800 million on that one project. The big subbies on the project would have been working to a similar profit margin, so after allowing for overheads, the value of the "work" in the project was probably less than 50% of the total project cost.

It all depends on what sort of job you are talking about. Leightons took on some unusual and potentially risky design and construct jobs they could be quite profitable but in general residential/ commercial or industrial construction the figures are more based on 10% overhead plus 10% profit.
If you are talking about project style homes you would be lucky to even match their pricing doing it yourself.

All these DIY programs on TV and weekend newspaper articles should come with a preface that they are for entertainment purposes only and the costs and timeframes are fictional. I think they do the general public a disservice lulling people into a false sense of ability and unrealistic budgets.
Apart from the self satisfaction of it all, the main advantage of being an owner builder is the saving of labour in doing things yourself. In doing so you will take longer and probably over complicate and over do things that a professional tradesman would do and your subcontractors will end up costing you more than if they were doing it for a builder as your novice approach will inevitably create more work for them to get the same end result.
Further to this, if you have to take unpaid leave from work to do the build you could potentially end up behind financially and have no builders warranty as well.

I have to agree with Ian. A lot of the jobs I priced years ago in the 90's to 2000's - extensions, additions renos etc was to work out the materials first lets say $20,000 then add the same amount for labour - another $20,000. Then I'd add 10-15% for profit and to cover myself. A way of checking was to work out how many sq metres and allow $2,000 psm. It was surprising how close the two figures would be after doing all my sums. This was for pretty standard construction with medium quality inclusions but no floor coverings or painting included. A lot of the time the clients wanted to do those themselves anyway. Of course if there was a bathroom or kitchen involved or some unusual aspect to the build we would add the cost of those rooms to the total as well.

Stewie

Originally Posted by Stewie D

I have to agree with Ian. A lot of the jobs I priced years ago in the 90's to 2000's - extensions, additions renos etc was to work out the materials first lets say $20,000 then add the same amount for labour - another $20,000. Then I'd add 10-15% for profit and to cover myself. A way of checking was to work out how many sq metres and allow $2,000 psm. It was surprising how close the two figures would be after doing all my sums. This was for pretty standard construction with medium quality inclusions but no floor coverings or painting included. A lot of the time the clients wanted to do those themselves anyway. Of course if there was a bathroom or kitchen involved or some unusual aspect to the build we would add the cost of those rooms to the total as well.

Stewie

I had a mate who ran a business on that formula. He ended up in bed on Serepax. I got a phone call from his wife asking if I could assist her in getting the jobs finished and winding up the business. The reason for the demise was a simplistic formula being used to calculate complex jobs. I am not suggesting your methods are not practical, it is more to point out that there are limitations. Particularly when it comes to young fellas just starting out on their own. We crusty old builders often forget that experience has placed alarm bells in our head that warn us of impending danger. The loose term is "anomalies." In the building trade there can be plenty of them.