Cohousing-L Mailing List: RE: Construction contracts/costs/builder's profits

[Rob Sandelin (robsan]

I know nothing about how builders do business in your area.  I do know, 
from living with two contractors within my own community is that 
figuring a 10% contingency is very typical.  For example the budget for 
our commonhouse project assumes an extra 10% for cost overages, 
unanticapated problems, extra things we forgot to itemize, ect.  Both 
contractors here add a 10% contingency to their bids on projects, just 
to cover themselves.  If there are few contingencies, then that extra 
is more profit.  If the contingencies are more than 10%, then the other 
percentage of profit eats the difference.  Bidding a single custom home 
project is pretty much solid numbers but according to my neighbors, 
5-7% overage is average.  Bidding to build 30 houses, plus 
infrastructure will have some very loose numbers, which may account for 
a higher contingency percentage.

Around here the prices for lumber change weekly (mostly upward).  A bid 
for a framing package done today would be higher than one done two 
months ago and trying to guess how much the difference will be is what 
gives contractors gray hairs. Remember bids are done often months 
before actually purchasing the materials and so the bids have to 
account for the inflation of material costs.  So I would guess that the 
percentages you mention include both contingencies and profits and 
therefore are probably inline.  For example on the labor numbers, 20% 
of labor cost in our area is for industrial insurance, which is a 
requirement. So a worker who is paid $15 per hour actually is making 
$18 per hour, with $3 going to insurance.  I imagine New York must have 
at least as high of insurance rates as we do.  Add up  various 
pensions, union payments, etc. and that quickly can become the high 
percentages you mentioned.

Rob Sandelin
Sharingwood