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Question on General Contractor Fees and General Conditions for completion of failed project

Last post 08-27-2008 11:48 AM by Quantity Engineers. 1 replies.
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  • 08-06-2008 11:01 AM

    Question on General Contractor Fees and General Conditions for completion of failed project

    I would like to get other opinions regarding General Contractor Fees and General Condition Costing for the completion of a problem project. 

     I'm working on an estimate for an apartment project rehab that failed with the original owner/builder.  The new contractor that the court appointed receiver shows almost 30% of the $3.2MM contract as General Contractor Fees, General Conditions and Insurance. 

     I could see up to 15% for a typical new construction or rehab project, but the 30% at first brush seems excessive.  After further thinking about it, the new contractor (in California) will likely take on some of the responsibilities and liabilities for the work completed by the failed original contractor.  In addition, the contractor has to put more time into the preconstruction reviews to meet with the city to determine an actual scope of work, meet with the receiver, and has actually reviewed all of the 150 units to put together a scope of work. 

     Does anyone else have opinions on the subject?  I'm sure that this will be an issue that comes up again and again over the next two years as the failing projects are taken over by the banks and/or courts.

     Thanks

    Dave

  • 08-27-2008 11:48 AM In reply to

    Re: Question on General Contractor Fees and General Conditions for completion of failed project

    Before I started my estimating consulting business, I bid projects for a general contractor.  We bid projects from $100,000 to $10,000,000.  I tracked OH&P and General Conditions as a % of the total bid for each job. 

    General conditions, or job site costs, would run from 8% to 15% from small to large projects.  Usually around 12%.  Larger jobs take longer, so the cost per month was for a longer time and the % of total didn't change much.  OH&P, profit and off-site costs, would be set at 5% to 7% depending on the size of the job and the complexity or potential liability in completing the project at the budget. 

    I found projects above the curve of the two percentages added together, 13% to 22%, based on the size of project, were usually won by another bidder.  I agree with you that a job taken over from a defaulted builder would make that liability cost at least 5% higher and the warranty of covering work already completed might be another 5%.  It might take 5% just to get previous work to pass inspections. 

    So much depends on the % of work already done and inspected, existing subcontracts and if they will be honored.  In other words, how much new risk is being taken on.  The original builder/ owner didn't have construction profit in his budget, he wanted his mortage as low as possible.  His profit was to be from rent income on an appreciating project with a depreciating tax base.  A new builder with no ownership value, and only construction profit is going to need a higher % OH&P.

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