# cost plus rate 18%? for pre-sold residential



## dmcelhoe (Apr 23, 2008)

Hi,
Does anyone have a feel for what a reasonable rate is for general contractor 
on a cost plus or more specifically what is the going rate for residential
custom builders. I realize there can be a lot of variation relative to
competition but at the end of the day we all have to eat or we find
something to do that will let us eat!!

Thanks
David


----------



## BirmanBuilders (Aug 24, 2005)

spoke to some gc's who would do an open book price. HO choses contractors from the prices and he would add 10%. We started to do his work after his lowballing framer never finished the job.


----------



## dmcelhoe (Apr 23, 2008)

thanks much for the input. 

David


----------



## Cole (Aug 27, 2004)

No less then 20% IMHO!


----------



## Joasis (Mar 28, 2006)

I will do 10%, depending on the project and scope. The GC who is doing a development here is doing it for 5%....I lost that customer, and I guess it is a good thing, I would have refused anyway.


----------



## Cole (Aug 27, 2004)

5%?

You have got to be kidding me!


----------



## d-rez (May 16, 2007)

It doesn't mean much without knowing the scope. 10% on a $100K addition is very different from 10% on a $2mil estate.


----------



## Joasis (Mar 28, 2006)

The home addition I lost will have 21 homes at a median price of 170k. Since this is project oversight and management, plus the headaches, $178,500 is a pretty neat fee for a few years part time work. I hated to loose it. Not only is it a pretty healthy fee, but you have to consider the GC is only splitting it with Uncle Sam....no WC, no builder's risk, no liability.....nice job for a part time gig. 

In my opinion, 20% would be a killer rate, unless you are building homes and making the margin as "profit". I have customers flinch at 10% on commercial projects.

Until I put it in context, I didn't realize how the 5% would work...guess I would not have refused....been pretty dumb to do so.


----------



## Bob Kovacs (May 4, 2005)

Depends on how you define "cost of work". If I can put my supervision time, trailer rentals, office supplies, phone lines, computers, GL insurance, etc., in "cost of work", there's nothing but profit left to be covered by the "plus", so 5% could be more than enough if the job is big enough. If I get all of that into the "cost of work", there's no way I'd be able to get 20% "plus" on top of that. It's all in how you move things around........


----------



## Heritage (Mar 20, 2007)

20% on the first 500k...15% on additional.


----------



## Heritage (Mar 20, 2007)

Bob Kovacs said:


> Depends on how you define "cost of work". If I can put my supervision time, trailer rentals, office supplies, phone lines, computers, GL insurance, etc., in "cost of work", there's nothing but profit left to be covered by the "plus", so 5% could be more than enough if the job is big enough. If I get all of that into the "cost of work", there's no way I'd be able to get 20% "plus" on top of that. It's all in how you move things around........


 
Are you saying you would manage a 1m custom home for 50k?

Consulting engineer
Obtaining permits
Draw up initial scope of work
Draw up initial budget
Meet with H/O 30 times
Finalize scope of work
Finalize budget
Receive 100 bids
Co-ordinate subs
Start project 
Manage throughout
Take full blame for everything
Meet with HO's another 30 times
You know where I'm going with this...for 50k?


----------



## Bob Kovacs (May 4, 2005)

Heritage said:


> Are you saying you would manage a 1m custom home for 50k?
> 
> Consulting engineer
> Obtaining permits
> ...


No, I'm saying that I'd be getting paid an hourly rate of +/- $120/hour for all of the time spent doing all of those activities, I'd have all of the costs for my insurance, computers, office supplies, etc., paid for as part of the cost of work, and then I'd get paid an additional 5% on top of the cost of work (including all of that hourly rate, etc.) as pure profit. So, in all likelihood, I'd probably bill around $150k in supervision, another $40-50k in the other items, and my $50k in profit, which would total around $250k, whereas you guys would charge $200k at your 20% number, have to pay all of your expenses and salary from it, and come up $50k short of what I would. Ohh, and that's assuming that you can get the owner to swallow your arbitrary 20% number after they've seen my proposal that fully identifies all of the costs and shows a "meager 5% profit". Do you think they'll be signing up with the guy who's making a "reasonable 5%", or the guy who's "raping them for 20%" at that point???


----------



## Joasis (Mar 28, 2006)

Good point Bob....you detailed what I was trying to point out. The scope of a GC's duties have to be definitive.


----------



## Double-A (Jul 3, 2006)

joasis said:


> Good point Bob....you detailed what I was trying to point out. The scope of a GC's duties have to be definitive.


Is, "I like to watch" too descriptive?


----------



## silvertree (Jul 22, 2007)

As long as General Contractors bid jobs differently, the clients will always be confused. 5% of gross after costs on a large job is OK, but some clients would balk at $120 per hour plus office expenses. Some would balk at 20%. I recently told a client costs times 1.66%. Out of the 66% I pay myself, advertising ect. The people acted shocked, I explained things a bit and signed the job. Of course that wasn't cost plus. You would have a hard time selling cost plus in Minneapolis.
On the other hand, whatever works for you. I've been in business 20 years, I'll try anything as far as bidding systems. But with true cost plus you aren't bidding. So unless were talking apples to apples, I say detail everything thats going to be done. Put a price on it and sell it.


----------

