CH.6 Flashcards
Revenue =
construction cost + fee
Fee =
Home office overhead = profit
- > OH =
2 ways to prep General Conditions
1) Apply predetermined % to anticipated yrly volume.
2) Prep a detailed line item statement.
If total anticipated rev = $200 mill and total anticipated HOOH = $4 mill, what is the min fee each project must generate to break even?
4,000,000/$200,000,000 = 2%
What are some home office GC’s that can be costed into a contract as reimbursable? (If mutually agreed upon b/w GC and Client)
- Scheduler
- Estimator
- Safety officer/inspector
- Data processing costs inc. (audits & accounting)
- Cost engineer/accountant
- SPM
- Pre-con service fee
- Specialty Superintendent (Concrete finish, earthwork, etc.)
Who is in charge of managing the home office GC’s budget?
CFO & CEO
What are some tactics to reduce overhead costs?
- Eliminating personnel/supplies & office equipment
- Attribute as much HOOH to jobsite
- Const. equip. must be on jobsite and not stored.
- Labor burden (Labor taxes+benefits) job costed to the project
When is “true” fee known
When the project is complete; all job costs and revenues are factored in along with HO GC’s.
Revenue or contract volume =
Total cost + Gross profit (profit before tax)
Total costs =
Const. cost + HOOH cost
Construction cost =
Direct const. cost + Jobsite admin. cost
Direct cost =
Direct labor + material + equipment + subcontractors
Net profit =
Gross profit - Income taxes
Is HOOH billable to client on A) lump sum jobs, B) open book negotiations?
A) Yes, lump sum = closed book accounting. Client doesn’t care how costs are accounted for unless they show up on COP’s.
B) Yes, depending on the contract. Must be agreed upon before completion of contract.
What are some ways to increase profit?
- Raise bid prices. (may lower volume)
- Increase volume w/o increasing fixed OH.
- Reduce fixed OH w/ constant volume
- Specialize in 1 type of construction
- Reduce construction costs
- Improve Pre-con planning
