Civil contractors are hired by people who want to build a house or renovate it. Most of these people don’t know how much hiring civil contractors costs. Civil contractors don’t always charge the same fee even if they are based in one city or state. That is why a lot of clients wonder whether the civil contractors they are transacting with is overcharging them.
The best way to understand how civil contractors price their services is to understand markup and profit. The markup formula is what civil contractors use to figure out how much they should charge their clients in order to cover overhead expenses and make profit. Clients may also use this equation to find out whether the price is reasonable or not. The problem is, the client may not have the exact information regarding the overhead expenses. For instance, civil contractors may set a reasonable markup of 1.50 and the estimated cost of the project is $10,000, they will multiply $10,000 by 1.50 and so they will charge you $15,000 for the project.
Some things included in a civil contractor’s overhead expenses are license, taxes, employee salaries, advertising, materials, and office expenses.
Civil contractors usually have overhead expenses that range from 25%-54% of their profit.
Some clients believe that 10% overhead and 10% profit is enough for construction projects so they try to convince civil contractors to lower their price. This is a bad move. A construction project, especially if you are building your own home, is a large investment. It is not wise to hire low cost civil contractors to repair or build one major investment. It is like asking a surgeon to lower his rate before he performs an open heart surgery on you.
Just like any business, civil contractors need to price their services right and gain profit to keep their business going. If you are going to choose a civil contractor with the lowest fee, you will be working with a contractor that will be going out of business while trying to build your dream house. Moreover, there is a big chance that the cheapest contractor will come up with a substandard result.
See Also: Hiring a Handyman