Is your Overhead Costing you Jobs?

Is your Overhead Costing you Jobs?

As you well know, times are tough for many companies in the construction industry these days – especially for smaller contractors with limited resources. Bidding for jobs has become extremely competitive and it’s often difficult to comprehend how the winning contractor is able to complete the project for their stated price. When it comes right down to it – there are only several components of any bid submitted for a job and there usually isn’t much leeway in most of them.

  • Materials – unless the winning bidder has left out materials needed to do the project, this category should add up to about the same for just about all contractors submitting a price. In some cases a vendor may give a contractor a better cost on materials due to a long term relationship, but even that shouldn’t be enough to cause a great separation between bid amounts.
  • Labor – this category includes the subcontractor prices you’ve compiled for the job and any labor your own crews will do on the project. Once again, unless the winning bidder has misunderstood the scope of work required or one of their subcontractors has miscalculated, there should not be a huge difference in this category of the bid pricing. Just as with the materials, most contractors bidding the work should be getting their pricing from a local pool of subcontractors who aren’t going to vary their bid amounts too much – even for contractors who keep them busy.
  • Overhead – this is the part of your bid that is often the culprit when determining whether your company wins the project and is normally the largest difference between the prices submitted for the job. While you should be reviewing your overhead costs on a regular basis, it’s even more important during times when work is hard to come by and bidding is so competitive. Do you really need to hire laborers to clean the jobsite or can your crews handle the task until the economy picks up? Is there a way to reduce company vehicle costs by limiting trips back to the shop during the day or doing more efficient planning? Can some of your superintendents handle a few of the estimating duties until you have enough projects going on to keep everyone busy?

You may not be able to do much about the material and labor costs included in your bids, but might be surprised at how doing an overhead audit can lower your prices.

Tags: , , , , , , ,

Leave a Reply

database management software