Contractors Overheads & Profit (OHP) %

[RichA]

I have contracted a builder to build anextension. This included some Provisional Sums where the final detail still needed to be agreed (e.g. patio), or particular items were being sourced from a third party (e.g. specific wallpaper).

The contact has a note that the listed Provisional Sums include 15% for Main Contractors Overheads & Profit. There was a separate note that £800/1,000 had been included for supply of facing bricks (the bricks are included in the contract sum and are not a listed Provisional Sum).

1. Is 15% OHP on Provisional Sums normal?

2. The Bricks have come in at £760. With +15% added this would be £874 (so I would need to pay the difference amount over £800 (i.e. £74/1,000). Should 15% OHP be added to a contracted item (where there is an allowance)?

Many thanks.

 

[noseall]

Confused sorry.
I just give a price and the customer says yay or nay. Those items that are 'unknown' are given as an estimated figure that can be agreed or disregarded later on.

No clue what your arrangement is, soz.

 

[RichA]

Thanks for your reply. I will try and explain better!!

It isn't always yay or nay. As the item in question might be an integral part of the job. Sometimes it is how much that needs to be agreed.

Say you price an extension, which includes fitting a bathroom suite. You know what the cost is for fitting the suite, but not what bath they are going to chose. So a Provisional amount of, say, £200 is put in for the bath. If they chose a bath that costs £300 how much do you charge them? If it is £300 then that element of the contract included no profit. It is not like fitting where your rates/margin is your business, both parties know the cost of the bath.

(NB I thought this arrangement was quite common!?!)

 

[tomfe]

It's not something I've come across on domestic contracts.
If a customer chose a more expensive bath and supplied it, then they take on the responsibility for delivery any anything that might go wrong with it.
If they they chose a bath out of 'my' catalog they would still pay retail and I'd still get the trade price.

 

[^woody^]

A PS is an unknown cost. Once it becomes known, it's an actual cost - but not an actual cost plus some other cost.

Taking your bath suite analogy, if you allow say a £1000 PS for a suite, the contractor prices his labour for the supply and fitting and the £1000 for the suite supply. If the suite price differs, then this alters the contract sum accordingly, but the labour price is the same. No other percentage gets added.

 

[Footsoldier888]

Isn't the point that you have contractually agreed to this? You can't easily argue it is unreasonable when you agreed to it in the first place!

I think it is only the same as if the builder had quoted you for the whole job as he would have added his profit margin onto those bricks. So it does seem fair to me.

However if the bricks are in the contract sum then that would include his markup, so that part of it doesn't seem quite right. However it hardly seems worth fighting over.