What is "Contribution to Overheads"

[Jim77]

Hi
Just received a quotation to lift and relay a badly laid driveway.

There is a 15% charge for contribution to overheads. What is that? Is it it recognised good practice?

Thank you
Jim

 

[skotl]

Might be better posted in "Trade Talk" as it sounds more like a general contractor question. You can press the Alert Moderators button, if you like, and ask them to move your thread.

 

[skenk]

It's not a way I would choose to lay out a quote myself but overheads are significant and they need to be accounted for in labour rates, materials markup or elsewhere, if providing a cost breakdown.

 

[mfarrow]

Many places to put these, I must admit it's usually there anyway, otherwise there might be a preliminaries section with project management/admin on there.

 

[noseall]

It's just another way of saying 'profit'.

 

[JohnD]

what matters is the bottom line.

Is the quote for the whole job reasonable?

any trader will include his costs of plant and machinery, office expenses, holiday pay, sick pay and pension is his calculations; and he must charge prices that leave him with a profit, or he will go out of business. There is no obligation to itemise it.

 

[Jim77]

Thank you all for your replies. I understand now (I think )

It seems it is just other expense the contractor has to cover and could be stated in any number of ways. I just hadn't seen it itemised in this way before.

Thanks again
Jim

ps

Is the quote for the whole job reasonable?

Yes I realise this is the important question and it is, I believe, reasonable - although more than I wanted.

 

[^woody^]

As others have said, it is a legitimate cost. Most firms will have included it somewhere within their costing - a lump sum quote, so it may not be noticed.

This is a management cost, and only tends to be noted separately in certain larger contracts - eg where the contractor is working on a "cost plus" [overheads] arrangement

But what some firms do, is itemise it separately and then the percentage is added to every single bit of extra work they do.

So be careful with this and get it clarified how you will be charged for extra work

 

[Jim77]

Thanks for that woody.
There is in fact an additional clause stating "Remedial work to Individual Areas as required - and the overheads element applies to each square metre at 15%. As you suggest, I'll get it clarified. This 15% is almost £4 sq m and there are 86 sq m. Could be quite a substantial extra.