Am I getting ripped off?

[Bod ...]

Are you happy with the price, and more importantly the builder, if so go ahead.

Blup

That's the main issue. Do you feel confident this is the right choice builder who will do you a good job.

There really are lots of scoundrels out there ready to rip you off with inferior workmanship and poor quality materials

 

[Diver Fred]

So I'm just abt to sign a contract with a builder for a quite large double height rear extension and internal refurb of a property.
He has sent me the final quote with the cost separated into three buckets;

- Cost
- Overhead markup
- Profit markup

Both the overhead markup and and profit markup are at 15%, making a 30% overall market on the costs and giving him a 23% margin.

That seems a bit steep to me, I had thought 10-15% margin more normal. I should add we had drawings and engineers calcs done, which he working off.

cheers

This does look like his "internal' accounting quote rather than the final quote which I'd expect to say something like
1: number of working days and number of men on site at £x per day or just a fixed price,
2: Scaffolding and protective fencing hire,
3: Skip Hire,
4: Toilet hire,
5: Any specialised tools hire,
(n.b. items 2,3,4,5 may be rolled up into one cost)
6: Material at price.

Expect for items 2 thru' 6 there to be a percentage added which you shouldn't have been told about - in this case it appears to be 15%.
The final quote should either quote labour cost and items 2-5 separately or add all together with the materials at 'price'.
Could be that his quote is badly worded so Cost is the manpower cost, the Overhead Markup is the fixed costs from hiring kit and the Profit markup is the % he adds to materials (Most tradies get a discount from their suppliers once they have an account which is put back on by the tradie when invoices the customer).

 

[johnny2007]

This does look like his "internal' accounting quote rather than the final quote which I'd expect to say something like
1: number of working days and number of men on site at £x per day or just a fixed price,
2: Scaffolding and protective fencing hire,
3: Skip Hire,
4: Toilet hire,
5: Any specialised tools hire,
(n.b. items 2,3,4,5 may be rolled up into one cost)
6: Material at price.

Expect for items 2 thru' 6 there to be a percentage added which you shouldn't have been told about - in this case it appears to be 15%.
The final quote should either quote labour cost and items 2-5 separately or add all together with the materials at 'price'.
Could be that his quote is badly worded so Cost is the manpower cost, the Overhead Markup is the fixed costs from hiring kit and the Profit markup is the % he adds to materials (Most tradies get a discount from their suppliers once they have an account which is put back on by the tradie when invoices the customer).

I've never stated labour cost in my quotes.
Some jobs would make me as little as £100/day, some others £500/600+.
It's not for the customer to know how much you're making.
Example.
Fitting an internal door, half day £100, profit probably £50/£60.
Fitting laminate floor on 70sqm, 2 days £800/£900, profit probably £700.
Then if the customer wants to diy, they can do that and then live with gaps everywhere and mdf trims along the skirting.
My quotes state exactly what I will do stage by stage, approximate time it will take and price.
If I then work on my own or with 10 people, how much I make, how much markup I apply to material and how much I pay for scaffolding, skips and tool hire is not their business.
They either accept the quote or go somewhere else.
Once you're established and people know you, it's even hard to price yourself out of a job.
Surely others can confirm this.

 

[Ed_Corney]

Ha.

My point isn’t that he shouldn’t make money or everything should be cost. Merely that its bit galling to have an overhead / profit figure based off a cost price that is being inflated above the cost of running his business (ie materials).

For arguments’ sake (and ignoring VAT)

If cost of job was £100k and he adds 15% both overhead and profit he is taking £15 to ‘run the business’ and £15k for profit

Let’s say labour/materials are 50:50 split and go up 10% and 20% respectively (which is fine), that’s an extra £15k for me to pay, and extra £4.5k of profit for him despite nothing really changing in terms of scope of work he is providing.

 

[Higgy28]

What exactly do you think overheads are? He is not pocketing that money, it is spent on costs of running the project.

 

[Ed_Corney]

What exactly do you think overheads are? He is not pocketing that money, it is spent on costs of running the project.

How re his overhead impacted by, say, the price of steel insulation rising by 30%? That's my point it seems a peak % uplift on close to peak material cost inflation

 

[freddiemercurystwin]

Just use someone else and continue in your ignorant bliss.

 

[Higgy28]

How re his overhead impacted by, say, the price of steel insulation rising by 30%? That's my point it seems a peak % uplift on close to peak material cost inflation

As I said earlier, my builder accidentally sent me his internal costing sheet.

His overheads were calculated by line item and summed up and converted to a total % value that was then distributed over each line item in the project.

He didn't directly send me his breakdown but it would have been about 10% OH and 15% margin. If costs had risen, his OHs as a % would have fallen slightly as a % of the total. Maybe your guy works it out differently though.

 

[Ed_Corney]

As I said earlier, my builder accidentally sent me his internal costing sheet.

His overheads were calculated by line item and summed up and converted to a total % value that was then distributed over each line item in the project.

He didn't directly send me his breakdown but it would have been about 10% OH and 15% margin. If costs had risen, his OHs as a % would have fallen slightly as a % of the total. Maybe your guy works it out differently though.

Yes that is what I would thought, £ note overhead staying the same, hence falling as %. Clearly I'm ignorant, though notice the other poster didn't answer my question

 

[Higgy28]

Yes that is what I would thought, £ note overhead staying the same, hence falling as %. Clearly I'm ignorant, though notice the other poster didn't answer my question

But you don't know if that would be the case for your quote or not. He's said it is (currently) 15%, if his material prices increased then maybe he would have reported it as 14%

 

[DiyNutJob]

My point isn’t that he shouldn’t make money or everything should be cost. Merely that its bit galling to have an overhead / profit figure based off a cost price that is being inflated above the cost of running his business (ie materials).

If you are unhappy with a service, find a different one. Alternatively, ask for a discount. They will either accept or reject. It's unreasonable, as a complete outsider, to attempt to micro-manage the internal mechanisms of a company. They would have designed their process to be at the right level of competitiveness, as evidence by your keen interest in their service.

 

[Notch7]

Ha.

My point isn’t that he shouldn’t make money or everything should be cost. Merely that its bit galling to have an overhead / profit figure based off a cost price that is being inflated above the cost of running his business (ie materials).

For arguments’ sake (and ignoring VAT)

If cost of job was £100k and he adds 15% both overhead and profit he is taking £15 to ‘run the business’ and £15k for profit

Let’s say labour/materials are 50:50 split and go up 10% and 20% respectively (which is fine), that’s an extra £15k for me to pay, and extra £4.5k of profit for him despite nothing really changing in terms of scope of work he is providing.

construction projects like refurbishment and extensions have all sorts of hidden delays, contingency, etc etc

take delivery of materials: your builder has to make sure there is work on site to do that day so there can be somebody busy whilst delivery shows up -but it gets cancelled, then the workers run out of stuff to do

take skips -if they dont turn up when requested, the digger driver and dumper may have to stop work and ry and get on with something else

lets say they are digging the footings and an unknown electric cable is discovered -UK power networks cant attend for a week. builder has to off hire machinery and re hire -or pay for a week of machinery sitting around at £500 a week


I really would begrudge the mark up on materials.

 

[Bod ...]

I really would begrudge the mark up on materials.

Why would you?