For an overhead rate of that much, I say it includes a job trailer, the company christmas party, an on-staff cook, a new work truck for the project, and a pretty nice boat for the owner of the company.

Does this builder have an office, office staff, project managers, etc? We found the costs vary widely depending on how big the business was ( all custom builders, no national builders). Profit of 40k, sounds good, maybe too good. Overhead of 70k, is it going to take him/her more than 1 year to build it?

I don't understand what you are doing. Will this be a Cost of the Work with a Fixed Fee or a Fixed Sum contract? Are you bidding the entire project or just the contractor's fee with a budget attached? Too many unknowns here to make more than a wild guess.

The builder's overhead may include the work of his own forces although it should not. I don't know what a contingency would be doing in a competitive bid of any kind.

I contacted several builders for a cost plus bid for a completed home based on my house plans, on my lot, with my financing.

We have only bought homes with a fixed sum contract in the past, so this whole process is new to me.

This is the first bid I have received. I expected a breakdown of all areas of construction along with the percentage the builder was charging for his fee.

The bid does include all areas of construction, in detail, broken down into material and labor cost. The total price for labor and materials is just over $400,000. For his fee(s) the builder is charging $120,000.

I was shocked by this number. It was my understanding that a cost plus contract is the COST of the house PLUS a percentage that the builder charges to build it for you.

I have no idea what the overhead and contingency numbers are for.

I guess it's beside the point, because there is no way I am paying anyone $120,000 to oversee the construction of this house. But I wanted to hear everyone's thoughts on what his overhead is.

rsc2a. I think you are right!!!

mdmomof3. He is a custom builder who works out of his home. A one man show.

Cost of the Work contracts are not bid like Fixed Price contracts unless you want a Guaranteed Maximum Price or you want to bid the fee as a fixed amount or as a % of the Cost of the Work. Any breakdown of construction costs would just be a budget rather than a bid.

If you don't understand the price call the contractor up and ask him to explain it.

Another thing you want to make sure of is that you pad your allowances. He could be low-balling tha allowances to get the bid lower. You don't want to be in the middle of construction and find out that, with your appliance allowance, you'd be lucky to have an open pit in the middle of the kitchen floor to cook hot dogs over. Better yet, spec everything out so that all the builders are looking at the EXACT same house.

Yes, I did this. I used excel to type up a list for each room in the house detailing model # for toilets, faucets, lighting, door hardware, etc.

I've designed the kitchen cabinet layout and gotten quotes for cabinets and appliances.

I forwarded photos of inspiration photos for the kitchen, baths, fireplaces, stairs, etc.

I then compared the amounts that he had listed in his "budget" for materials/allowances to the amounts I had figured searching out vendors online.

However, I have no idea what things like the foundation, framing, excavation, driveways will cost.

I will wait for other budgets for comparison.

Overhead is the contractor padding his fee. These may be legitimate costs (although I have a hard time believing it) and therefore the builder is saying he wants 10% *profit.*

But my guess is the builder thinks his "low" fee of 10% will be the number you look at, and not the actual 30% that he's really charging. At least he's being honest and putting it in black and white. I'd ask for a complete breakdown of those overhead costs, especially is he doesn't have an office or staff to cover.

As macv says, in a Cost Plus contract, the builder is just proposing a budget plus their fee. The actual costs will depend entirely upon you.

The way a Cost of the Work contract is usually bought out is to invite contractors to present reasons why they should do the project and to also provide you with a ballpark budget total and a Fee proposal. If you want to find the one who can do it the cheapest ask for a Guaranteed Maximum Price as well (home builders are not usually willing to do this since they don't make a larger profit by keeping the costs down). The Fee can be a lump sum or it can be % of the actual Cost of the Work. When you think you have found the best contractor negotiate the final Fee and draw up a Budget together. That budget would include a contingency like any budget should.

OH&P are always part of the GC's Fee not not normally broken apart and, at any rate, would not be part of the Cost of the Work unless there is staff permanently on site in a trailer, etc.

Large projects are run this way because delays are usually more costly than the GC fees and the Owner usually wants to have control over the buyout of the subs. There is usually a GMP with a Shared Savings (the amount that the project cost is below the GMP is shared between the Owner and the GC so everyone benefits from a well run project ... having everyone working toward the same goal can be amazingly effective)

Have the GC send you an e-mail on the explanation...this way you have it in writing.

So the estimates of labor and materials was around $400K, then he wants 120K for his services. So that's cost plus 30%. Most people on this forum have seen 10-20% for the plus in cost plus bids. In your next contact with this GC, refer to his bid as Cost Plus 30%, and see what the next GC's Plus is. Maybe your area is 30%... maybe it's 15%, keep looking.

But if this GC did do a full breakdown with some real estimates (not just numbers on a spreadsheet), it speaks to his/her professionalism and thoroughness. The 6+ GCs we interviewed and had quote basically glanced at the house plan and blurted out a number.

In your Invitation to Bid there should be Instructions to Bidders and a Bid Form. Any bidder who did not fill out the form properly should be considered "unresponsive" and dropped from the bidding (unless you are willing to let him correct it).

Sloppy, hard to understand bid proposals are the inevitable result of sloppy bidding documents and procedures. I recommend putting together a proper set of bid documents and rebid the project. If you don't know how to do this you should hire a professional to assist you. It might save you a great deal of money.