# Question from lawyer trying to help contractor



## scp (Dec 15, 2008)

arty: Hi, everyone:

I'm not a contractor; I'm a lawyer who stumbled across your site while researching a question for a contractor client. I'm not as familiar with contracting practices as I'd like to be, so I hope you'll help me help him. 
Here's the question:

Is it standard practice for a general contractor doing custom home work to markup the hourly rate for laborers in addition to charging a flat percentage for profit and overhead? 

Thanks in advance for for any help you can give.


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## TurnkeyConst (Feb 14, 2007)

In my experience with doing hourly work. My hourly charge would include any workers I have. If the job required more workers at any given point the contractor should have that stipulated with an extra charge per hour. Always you will have a percentage for overhead and profit. So it should be STIPULATED in the beginning not just show up in the middle of the job. If we need help as far as sub-contractors that is a whole other story than charging for individual laborers.


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## rbsremodeling (Nov 12, 2007)

scp said:


> arty: Hi, everyone:
> 
> I'm not a contractor; I'm a lawyer who stumbled across your site while researching a question for a contractor client. I'm not as familiar with contracting practices as I'd like to be, so I hope you'll help me help him.
> Here's the question:
> ...


The word standard is a loose term as best. But the answer is yes. That is the way I do it. my hourly fees are marked up to cover overhead and a percentage is used to cover* my *overhead and profit.

This is an easy explanation but what he did in my eyes is standard

Are you with HOWEY,DEWEY and CHEETUM?? :laughing:


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## silvertree (Jul 22, 2007)

Yes, same as Rory.


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## Ivinni (Jan 11, 2008)

> Are you with HOWEY,DEWEY and CHEETUM?? :laughing:



:laughing:


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## AtlanticWBConst (Mar 29, 2006)

Yes. There are additional costs associated with every employee that works.


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## mickeyco (May 13, 2006)

> lawyer trying to help contractor


















.


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## Jason Whipple (Dec 22, 2007)

$200 an hour and the lawyer is going to get his advise from strangers:laughing::laughing:

Glad I'm not paying the bill, I'd be pissed!:furious:


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## Chap (Aug 19, 2007)

I generally give people the benefit of the doubt, but this sounds like a homeowner who is pissed because he thinks he is being charged to much.


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## Jerrald Hayes (Apr 24, 2006)

SCP regarding your question: 



scp said:


> Is it standard practice for a general contractor doing custom home work to markup the hourly rate for laborers in addition to charging a flat percentage for profit and overhead?


...it isn't entirely clear just what you are asking. 

The tricky phrase in there for me is "hourly rate for laborers". 

If you really meant to say "hourly wage" instead of "hourly rate" I would then say yes it is typical to markup the hourly wage for laborers to account for Labor Burden costs related to the individual laborer. Burden includes employer taxes, insurance, benefits, vacation time and any other un-productive time that needs to be accounted for as a function of labor. Burden does not include employee withholding, since they are deducted from the employees gross wages.

That marked up hourly wage (which is often referred to as the "employee's cost") then gets marked up again to account for the company's operational Fixed Overhead costs and Net Profit.

However as I alluded to in the *overhead and profit* discussion here in *post #43* there are some contractors get confused in their understanding of how markup and profit works and is applied in a business and sometimes markup costs twice for the same purpose...



Jerrald Hayes said:


> [...]
> 
> The reason I ask that is because I have seen contractors in other forums develop a Capacity Based markup Loaded Labor rate (which is a labor rate that takes into consideration, an is thereby "loaded with" all the Variable Overhead and Fixed Overhead costs and Net Profit associated with a unit of labor. I.e. wage/salary + benefits + overhead costs + profit margin) and then multiply that figure by 1.5 Uniform Markup multiplier they're read about in Michael Stones book which essentially has them double dipping for their overhead and profit and they come up with a ridiculously high figure which of course would be rejected.
> 
> [...]


Hope that helps.


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## TigerFan (Apr 11, 2006)

scp said:


> arty: Hi, everyone:
> 
> I'm not a contractor; I'm a lawyer who stumbled across your site while researching a question for a contractor client. I'm not as familiar with contracting practices as I'd like to be, so I hope you'll help me help him.
> Here's the question:
> ...



Absolutely, the hourly cost of labor to a contractor includes items that are not standard overhead and profit.

Start with workers compensation insurance - which is paid for every hour of labor associated with a job. A $15 per hour guy actually costs a cotnractor about $25 per hour.

I know I charge it in my work.

Customers have no idea of the true cost of putting a crew of men on a job site, trained, insured, providing a safe environment, working according to OSHA, etc...


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## dirt diggler (May 14, 2006)

scp said:


> arty: Hi, everyone:
> 
> I'm not a contractor; I'm a lawyer who stumbled across your site while researching a question for a contractor client. I'm not as familiar with contracting practices as I'd like to be, so I hope you'll help me help him.
> Here's the question:
> ...





*So do I get to charge YOU $260 per hour to answer this question?:*laughing:



(damn - that felt GOOD)


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## Ed the Roofer (Dec 12, 2006)

scp said:


> arty: Hi, everyone:
> 
> I'm not a contractor; I'm a lawyer who stumbled across your site while researching a question for a contractor client. I'm not as familiar with contracting practices as I'd like to be, so I hope you'll help me help him.
> Here's the question:
> ...


SCP,

As one who would like to see you benefit your client to his best result, I feel that a bit more detail would be needed for a variety of responses that could be more pin-pointed directly at your particular case and situation.

*Now, please pay attention:*
Be more specific regarding the question you need comments on.

Also, you will be able to weed out the genuine versus the disengenuous responses on your own, but Jerrold Hayes has a substantial background in the nuances of this type of discussion.

For further easy to access information, I recommend you visit this site and seek out information from Bob Kovacs at: http://forums.jlconline.com/forums/index.php
in the Estimating and Markup Subforum.



Now, in my own free humble opinion, which is all it's is worth, the contract should have specified a precise amount for the hourly rate to be charged in one respect, or on the other hand, it could have been the hourly rate Plus a certain percentage for GC Markup, or simetimes properly or improperly called GC Overhead and Profit.



I also strongly recommend making contact with Michael Stone at his site:
http://www.markupandprofit.com/books_mark.html



Since these terms and the definitions you are seeking clarification on are common to the industry, would this project per chance have anything to do with an insurance restoration or remediation project?

I sincerely hope that we can at least point you in the right direction, but to do that in a more accurate manner, you might like to offer up which State you are litigating this case in, as some have peculiar differences from others.


Ed


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## tgeb (Feb 9, 2006)

rbsremodeling said:


> Are you with HOWEY,DEWEY and CHEETUM?? :laughing:


 
That would be, Dewy, Cheetum, and Howe, llc. :smartass:


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## Ivinni (Jan 11, 2008)

tgeb said:


> That would be, Dewy, Cheetum, and Howe, llc. :smartass:


:rockon:


Bet you never knew there were so many comedians in the contracting business.

Don't take it to heart. Everybody here is so use to it being the other way around, they couldn't resist.


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## neolitic (Apr 20, 2006)

Chap said:


> I generally give people the benefit of the doubt, but this sounds like a homeowner who is pissed because he thinks he is being charged to much.


:whistling


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## Max Nomad (Aug 29, 2008)

> scp
> Registered User
> Trade: *contruction* lawyer
> 
> ...



...A Construction Lawyer that can't even spell Construction asking strangers for info that can be found in almost ANY "Contracting for Beginners" book.

in a word, "Jackleg".


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## dirt diggler (May 14, 2006)

i've always heard lawyers refer to themselves as "attornies" as well.

in addition, wouldn't somone who specializes in construction law ALREADY be quite well-knowledgeable in the practice of contractors?

hmm, it is beginning to smell like a HO.


(no - not that kinda ho:laughing


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## dkillianjr (Aug 28, 2006)

Chap said:


> I generally give people the benefit of the doubt, but this sounds like a homeowner who is pissed because he thinks he is being charged to much.


My thoughts exactly! Sounds like a cheap piece of garbage homeowner:shifty:



Dave


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## DecksEtc (Oct 27, 2004)

dkillianjr said:


> My thoughts exactly! Sounds like a cheap piece of garbage homeowner:shifty:
> 
> 
> 
> Dave


My first thought was that is was a lawyer trying to "screw" a contractor.

Just my gut feeling...


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