What do you consider reasonable contractor rates?

[Gary Allan]

Now here's where I get sticker shock with contractor rates. Now most of the things that we get a contractor to do aren't necessarily "highly skilled" ..it's just the learning curve for the average human is on the expensive side. There's also the desire and time involved.

One of my former neighbors was a concrete man. His father was and is still a concrete man. His profit margine was a about 33% of the job. The basic physics of concrete (his paraphrased words) works out to a semi-firm relationship between yards of concrete and the labor to finish it. Hence ..he could basically calculate the yards of concrete he needed ..and just triple it. As the concrete price went up ...so did his typical labor costs ..and his profit went with it. If he wanted to make "more" ..he worked the job himself.

This isn't what I find most contractors operate under. I can't figure what mulitplier they're working under ..and how they come up with the numbers that they do.

The way I figure it, given the cost and labor involved ..and even assuming a 50% idle rate, the average contractor in my area is making about 125K a year.

So beyond all the "whatever the market will bear" bull hooy, how does a given contractor calculate his price?

The only other time I ran into this was at my old job. We had an outside contractor do lots of the piping jobs in stainless steel. They had a "code welder" in the company ...but he wasn't on the job any time that I saw them. We had qualified personnel that could do the job.

For the price that they billed the company, I could have had these individuals sitting at home with a pager (working on other stuff) for about $50k a year and rented all the equipment (or bought it) ..and sat at home myself with an easy 100k profit. There is something economically "unright" here

 

[Pick]

I think the going rate for finished concrete work in the eastern US is around $3 per square foot.

Down here in Florida, they like to pay 20% less in wages, and charge 20% more for their services and product.

For example, my wife works for a retailer that has stores across the entire US. When we moved down here, they kept her wages at what she was making up north, which are $4 higher than what they would normally pay down here. BUT, the prices charged in the store are the same as what they are up north!!!! Plus store sales volume is about twice as much too. They really are not fair to the workers here in the south.

The cost of living here in Florida is higher than the midwest. Insurance is a biggie. Food, particularly at restaurants is higher, as is fuel, and electricity. Sure, Florida has no state income tax, but believe me, they get it back in other forms of taxation.

 

[goodoleboy]

I think it depends on the level of skill involved for each specialty.. I heard a story about roofing it does not take much talant so prices remain real competitive cuase everyone can learn it easily. Same applies for people who cut grass of course with these bargain basement prices you risk them not having insurance for employees or themselves.

 

[Bret Chase]

quote:

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Originally posted by goodoleboy:
I think it depends on the level of skill involved for each specialty.. I heard a story about roofing it does not take much talent so prices remain real competitive cuase everyone can learn it easily. Same applies for people who cut grass of course with these bargain basement prices you risk them not having insurance for employees or themselves.

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as far as roofing goes it depends greatly on the material being used.. asphalt shingles are pretty simple to put on, metal roofs require a different skill set, as do cedar shingle roofs, rubber has tons of code requirements, and slate requires a true craftsman (it better at $2500/sq). We only use well established companies at work for our roofing (assuming we don't do it ourselves).. roofing is extremely hot, brutal work (esp for the lumper), I've done hundreds upon hundreds of squares of roofing over the years (thousands if you count metal roofs) and I'm never unhappy when we contract it out.

back to the original topic.. Our standard labor rate is currently (at least)$35/hr and we've been in continuous operation since '46 and do about $7,000,000 a year in projects. You should do a little research into the insurance costs of being in construction... it is very very expensive these days... I think it's about 50-90% (or more.. last I heard, logging was at 225%) of a person's wage (depends greatly on what you're doing).. IOW, if someone's making $10/hr, the premium for them is $5-9/hr. Insurance costs (and OSHA compliance driven costs) are what drive our labor rate up year after year.

now this is in the commercial market.. residentil; contractors, OTOH, I don't know how they do it.. we've got a renter at one of our properties, that has a habit of declaring bankruptcy every 5-10 years, but he's got 3 '04 F150's, an '03 or '04 F350, an '04 Cat backhoe, and a *FULLY* funded stock car. We look across the parking lot and wonder how the **** he does it. I think my dad put it best.... "Who's renting from who?"

 

[Amkeer]

The price of work is directly related to the labor involved to complete the job. The more complex the task the more labor intensive and it will cost more. A typical round figure for cost per employee is around $35-$45 per hour which should include overhead and profit. That will vary region by region, but is what is the norm for Florida. I use a 25% profit base on all work.

Were you get price gouged is A/C contractors in the summer and roofers. Typical 3 ton a/c system material cost is around $1600 including some incidentals. They will nail consumers at $4500-$6000 to install the air handler and condenser. A high figure for actual labor involved with these 2 peices including overhead is less than $400 installed. That leaves a whopping profit of of $2500 to $4000 for less than 5 hours work! That works out to almost $880 per hour!

 

[Gary Allan]

What I'm running into is that everyone is a gouger. Most REAL work is done on home equity. I tend to look at what any competent and viable business uses for labor. Using the two that come to mind which are a non-dealership repair shop (fairly full service and upscale) and a computer services operation that does networking as well as PC service. They both fall into somewhere around $60/hour. This is also what the local plumbers get.

I had a contractor have the nerve to give me a $7500 estimate on putting a true (not fake) French door in a second floor room ..where the most distinctive prehung/framed unit I could find was about $1800 (at the time) and more common (but high quality) were around $700. The hacking and installing of the header and the installation would not have taken even a day. What makes anyone think that I'm going to pay them $6000 for (maybe) 8 x 2 hours work?? Even adding the trip to the home center and the disposal of demo debris you may be looking at another 3-5 hours.

It was the same thing with the gutter guy. First thing is ..he pulled up in a V10 Ram ..brand spanking new. He was selling seamless gutters. He quoted a price for the whole house (many gutters) that was well on the high end. He had a broucher for one of those upscale prefabbed bay windows that you just put in and finish out. I asked him what they go for. He said something like that can run you $20k.

He didn't get the job either.

I'd like to catch the change that falls from these contractors customers pockets. They surely are nature's way of saying that they make too much money.

 

[Bret Chase]

Gary,

the guy gave you what we call the "I don't want to do this, but if you're stupid enough to pay this much I will" price.

I can also tell you've never had to retrofit a larger door into an existing structure.. you'd be lucky to get it done with 32hrs labor (2 guys, 2 days), start to finish. more if there's hidden wiring and/or plumbing in the way (wiring is much easier to deal with than plumbing). I haven't put in a set of french doors in quite a while, but the last ones were Marvins that ran about $2800.

ymmv,
Bret

 

[Drew99GT]

This may be out in left field, and I know I've mentioned him quite a few times here before, but look at Tom Martino's troubleshooter network for good contractors and report bad ones to him; he gets **** done for people who've been screwed over. I listen to the show on a daily basis and, oh, about 90% of his cases are contractors. A lot of them are truely crooked dudes. The Trouble Shooter

 

[cousincletus]

I just got vinyl siding (3 bedroom standard rancher house approx. 1100 square feet) for $6,000 and the contractor did a really good job. I got three estimates from different contractors. The highest estimate was $11,500 and the other estimate was $9,500. The estimates were all over the place. I looked at a house that he just completed before we gave him the ok to start the job. Here in the Richmond, VA area the contractors usually gouge you for insane amounts. You really have to shop around for someone decent and honest.

 

[Gary Allan]

Bret,

I can tell you're in the 6 digit income bracket with 6 month of labor. Gotta save up for that rainy day that never shows

(note the

)

This was an exterior wall ..and the prices that I quote are about 8 years old. This would probably be an 11 or 12k job if inflation were taken into account. Nobody short of a brain surgeon is worth that much money in that frame of time ..for that type of work. It's not that highly skilled. I've done it myself in an unfinished environment.

Let me put it this way. Even at your quoted time ..and assuming that it now cost $10k for the same job ..and even with the upscale door that you're talking about (my cheap steel full glass one cost much less) ..you're talking about $7000 worth of almost pure labor for 3-4 man/days. If you only worked 2 days a week with one other person ..you would be in the $150k bracket ..each of you. What professional engineering or finance or just about any other professional can make $150k for 2 days work???

If you can command that much money for so little work (triple or quadruple ..or even quintuple it) and still seek a profit beyond it ..then the market is lacking in the number of contractors ....except there's no lack of contractors to work at that type of price ..which appears to be most of them.

 

[TooManyWheels]

My Mother had a 5' x 9' front window that needed to be upgraded from 1950's vintage steel to current vintage double pane. The one estimate she got was for $5500.

I bought the Pella window for right around $1000, and spend around 14 or 15 hours (plus a couple of hours worth of helpers to lift it into place) in the installation. Materials were another $45.

Gary, I believe many contractors do have a general idea of "what the market will bear" and simply vary that up or down slightly depending on whether they are over- or underworked.

In defense (slightly) of contractors, there is lots of hidden overhead priced into the jobs - estimating costs, non-payment and collection costs, rent for storage building, travel, dump fees, liability insurance, health insurance for the owner, lost and stolen tools, bookkeeping, advertising, permits, picking up helpers, lost time from weather and sickness, etc, etc, etc.

Also, there is no company retirement contribution, social security matching, savings matching, vacation, or bonus. That has to come from somewhere.

I think the biggest gray area for most contractors is an inability to do precise estimating due a lack of time to estimate a job that they likely will not get, the inability to precisely capture previous actual costs for work done, and the inability to minimize or predict the variation in circumstances that will occur on the jobs to be estimated. My father used to be an accountant for a moderate-sized construction company (individual jobs might be in the several-hundred $K range) and they estimated from very, very general rules of thumb which were never validated after-the-fact. They didn't know what activities made or lost money at the estimated rate. So I think it often does boil down to "Are we making enough at the rates we are charging"?

[ July 25, 2005, 12:01 AM: Message edited by: TooManyWheels ]

 

[Not the Autorx Frank]

Gary

You hit the nail on the head (Had to say it sorry)

2 things are in play here.

#1 Liability, Have u ever had to jackhammer concrete out and redo it. no fun. There are alot of things that can go wrong even witht he best of skill and experience.

#2 Shortage of labor and materials. Its hard to even find a good contractor let alone a reasonably priced one. Supply and demand my friend....

basically people are paying it so they keep charging it. (Gasoline?)

Been a while Garry..Take Care..

 

[Amkeer]

I had a company quote me a cost to install 11 new windows in my old home. They were the high quality 7/8 inch insulated vinyl with insulated frames. They gave me an estimate for $11000 g's! I never laughed so hard in my life! I sent them on there merry way. Two weeks later they came back to see how they could get the business. I told them to sell me the windows and I will do the install. The windows were worth about an average of $250 a peice not including the tax and delivery. They sold me the windows delivered for just over $3000 and it took me 6 hours to pull the old windows and install the new. The invoice for the cost of the windows was $2500 for the distributer. They would have made around $850 per hour!

So see you do not have to go to med or law school to make the money!

 

[Gary Allan]

quote:

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In defense (slightly) of contractors, there is lots of hidden overhead priced into the jobs - estimating costs, non-payment and collection costs, rent for storage building, travel, dump fees, liability insurance, health insurance for the owner, lost and stolen tools, bookkeeping, advertising, permits, picking up helpers, lost time from weather and sickness, etc, etc, etc.

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I agree. That $150k figure that I pulled out of thin air would probably be reduced to $100k after you filter all the ancillary costs. Still a stellar living for the time invested. You can always cite that this is a manual trade and that, as a subcontractor or contractor, your health is the main life line to future income. You're cutting any real income in write offs to minimize your tax burden ..so you won't get much disability and probably little social security in your later years ..but that's all down to a matter of how "upright" you run your books. You stiff the feds and the locals ..you get your due if you stumble. This is the real "risk" involved here. It's typically more of a true gamble ..where you're trying to get away with something. If you get burned ..who's fault is it

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I fully understand the frustration of sending 33% of every $$ you pull in to someone that appears to do you no good (workers comp, SS, unemployment, local, state, federal, medical insurance.) ..but if you're factoring that in ..and don't want to do it anyway ...what are you saying? "I want my cake and eat it too"??

There are also the standard cons. In roofing it's always the lowball estimate ..then the day of the job they start pulling up the roofing and say "Oh, I'm sorry Mr. Allan, but your wood is rotted. We could do the job ..but we couldn't garrantee it." ..now all my estimates for roofing insist that they can pull up the roofing to examine it before giving their estimate, because the day of the job ..the quoted price is the quoted price. If they try and jack me ..they can take a hike. This has had a couple of contractors just leave instead of giving the higher "w/wood" estimate. With boiler service it's "your boiler is pretty old here" ..which is a standard statement when the service tech sees that the boiler is over 10 years old. With window sales ..in older homes, it's wanting to charge you $40/window (probably $80/window now) for capping. This is typically a savings to the contractor, where they can merely hack out the expensive and intricate moldings that are in the current windows ...and can run their 4 screws and cap over the whole mess with aluminum. Grates are another premium item. It takes 10 seconds more labor to put a grate in a window at the factory during window assembly and the cost of a vinyl grate should be on the order of about $0.50 (there are plenty of like items at Wall Mart with more material for about that much on the producer/intermediate user level) ..yet they'll attempt to charge you $25/window for them.


You could always go T&M ..but then you've got to have the ability to figure out if they're stallballing you....and you've got to be able to tell them to take a hike if they're feather bedding you.

This is probably a nut that I can't crack.

 

[TooManyWheels]

quote:

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This is probably a nut that I can't crack.

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Unless, of course, you are thinking of it as your next business opportunity.....

 

[Bret Chase]

quote:

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Bret,

I can tell you're in the 6 digit income bracket with 6 month of labor. Gotta save up for that rainy day that never shows [Wink] (note the [Wink] )

This was an exterior wall ..and the prices that I quote are about 8 years old. This would probably be an 11 or 12k job if inflation were taken into account. Nobody short of a brain surgeon is worth that much money in that frame of time ..for that type of work. It's not that highly skilled. I've done it myself in an unfinished environment.

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I think you missed the first sentence of my reply. I'm in no way defending a $7500 estimate.. I was pointing out that your time estimates were hopelessly optimistic going from nothing to a completely finished installation, especially if it's an older home with lathe and plaster walls (very common around here).

now, about 90% of our work is commercial/industrial, to us the residential market isn't worth the headaches.

 

[JavaMan]

I was gone one time and we had a leak. While fixing the leak the plumbers (and my wife) decided that the toilet needed a new tank kit installed. I had just installed one a couple of months before. $350.00 for a $10.00 kit and 15 minutes work (what it would have taken me). That's not the beginning of the charges. Just an example.