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A Smarter Way of Charging for Construction Overhead and Profit

Article-A Smarter Way of Charging for Construction Overhead and Profit

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Accurate bids require more than just applying a formula. Here's what to do to improve your construction company's results.

Figuring overhead and profit is the most challenging step in creating a bid for a construction project. By contrast, estimating direct costs of construction—namely the costs of labor, material, and trade partners (subs)—is relatively straightforward. You provide your material suppliers and subs with lists, plans, and walk-throughs and get back written quotes.

For labor costs, if you have developed a file of labor productivity records, you need only count and multiply to reliably project costs. (If you are not up to speed at figuring direct costs of construction, see my book Nail Your Numbers: A Path to Skilled Construction Estimating and Bidding and my earlier JLC articles about the creation of labor productivity records and other tools of estimating.)

In this detailed article, we will turn to calculating overhead and profit charges for a project.

To read the rest of this story from The Journal of LIght Construction, our partner publication, click here.

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