Every remodeler battles job cost overruns. They are universal to this business and are the single most common reason remodelers are not profitable.
Ninety percent of overruns will be in the labor category. That’s not surprising since estimating labor is an act of judgment and the actual job performance is subject to so many variables.
If you can get your labor estimates and actuals to match up within 2 %, you have done the hardest work to make your company profitable. Here are some tips on solving job cost overruns in labor and subcontractor costs:
Solve Labor Overruns…
- By sharing the estimated time or labor costs for each phase with the carpenter in charge of the project before work begins.
- By sharing the job cost reports with the Lead Carpenter so they can track, monitor and manage the labor, material and subs going into the project.
- By getting input on your estimates from the carpenter or production manager before your proposal is submitted.
- By having the field keep daily time cards separating the job into phases so that overruns can be tracked and analyzed to the finest detail.
- By instituting an incentive program which shares job cost savings between the company and the lead carpenter.
Solve Subcontractor Overruns…
- By telling subs that they may visit every job before giving a price. If they choose not to do so, the risk of unknown (but foreseeable) conditions falls on them.
- By always getting fixed prices from your subs.
- By referencing your plans into your subcontractors’ contracts. By asking that they let you know in writing (as part of their contract), if they are not including any labor or materials shown on the plans that would normally be in their area of specialty.
- By insisting subs let you know if there is a change that will cost extra to their contract before they actually perform the work.
Excerpted from The Remodeler’s Guide to Making and Managing Money, by Linda W. Case.