What are typical percentages for costs?

last year

Hi pros! I have a pretty substantial remodel of a 1975 home in Colorado. Sadly there was asbestos, so every wall and ceiling we are touching had to come down. All windows and sliding doors (3) are being replaced. The small primary suite is being reconfigured. The kitchen is being remodeled - all new cabinets, countertops, etc. New water heater, HVAC and appliances are being installed, etc.. The company I'm working with has connected me with an Interior Designer they use a lot. In addition, there is a separate project manager and a site supervisor. I am being charged for hours for each of these people plus 20% on top for the GC fees. In full transparency, I tried to get the GC to allow the deisgner to be the PM because she did the design, drawings, etc. and typically has the dual role. The GC wasn't open to this because he had just hired a PM and wanted to give her the work. This is the fourth time I have remodeled a house (or major portions of one) - yes, I'm a glutton for punishment! I've never had so many people in different roles. So my question is, what percentage of the project cost is typical for these roles? For example, one should expect to pay 10% to a designer, 5% to a project manager and 7% to the site supervisor plus 20% of their fees to the GC. Or is having someone different in these roles atypical?

I want to be clear - I am not suggesting that the GC should not get their 20%. I'm just asking what is typical for each of these roles - and if it is typical to have all of these roles on one job. Thanks so much for your help!

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Comments (3)

PRO
Joseph Corlett, LLC
last year
The GC is going to let you pay for as many of these people as you'll tolerate.
PRO
Charles Ross Homes
last year
Asking your general contractor to cede control of your project to someone outside his company is a recipe for problems. If you want to do it differently next time, that's fine. Stay the course on this project and hold the GC accountable for the results.
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bry911
last year
First, ignore typical percentages. There are so many different contracts and payment terms that generalizations about percentages are not that valuable. Look at what this is going to cost in total and see if it is within your budget and how that compares to other costs. You shouldn't care if a contractor makes $100,000 or $40,000 if you pay the same either way. So look at the price you are paying and the quality you are getting for that price, determine if that is comparable and reasonable then use that for the decision.

The company I'm working with has connected me with an Interior Designer they use a lot. In addition, there is a separate project manager and a site supervisor. I am being charged for hours for each of these people plus 20% on top for the GC fees.

If you are paying hourly rates for product management and site supervision, that seems a bit ridiculous to me. Those are quite literally why you hire a GC, and there is nothing wrong with the GC hiring people to assist him/her in doing those jobs, but there is a problem with a separate (hourly?) charge for their services and a bigger problem with a builder's percentage on top of that.

Builds have two types of costs, direct costs and indirect costs. Direct costs are those costs that go directly into producing the house such as the plumbing or electrical, so the entire plumbing or electrical bid would be a direct cost. Indirect costs are those that are necessary for the house to get built but don't go directly into the house. A builder's truck is a great example of an indirect cost. Supervision is always indirect and that is what the builder's percentage is for... to cover overhead and profit. Supervision of the work and the project management by the builder is overhead.

Another way to think of this. Suppose a builder can built two houses per year, making $40,000 profit from each one. The builder decides to hire a site manager, which reduces the builder's profit off each home to $25,000 but allows the builder to build twice as many homes. So instead of making $80,000 the builder is making $100,000 per year. Suppose output can again double with a site manager... The builder might then only make $15,000 per home, but make it from 8 homes. That is synergy and explains why a builder might want a site manager and project manager instead of doing all that work themselves.

However, if the builder is charging the homeowner for that same project manager. They are just increasing their profit from $80,000 ($40,000/home * 2 homes) to $172,000 (43,000/home * 4 homes). Why would you pay extra for the contractor to delegate their job?

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This is not to say that you shouldn't hire this contractor... see the first part of this.
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