GC: Average Total Labor Cost on New Build
Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
GC: Average Total Labor Cost on New Build
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Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
3yHeld hostage ? Price gouging schemes ? I dont think you know how a contracting business is run , the intent is to make a profit . Everything a contractor does has a mark up on it .
But I guess you are the guy who brings his own steak to a restaurant and asks how much just to cook and serve it ?
I have been in the contracting business 35 years , and the ONLY contractors that work without supplying materials do piece work for track builders . They dont leave a jobsite for years . If you have that much work , you could find subs for that , but not a GC .
Either way you go , the GC and the subs are still going to make the same amount of money in the end . You wont save anything . Probably will cost you more . And if you supply materials , you get no warranty .
62 Replies
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
What is weird is that to this point, most of the responses have not had anything to do with the initial question.
Most general contractors working on a cost plus basis apparently want to charge anywhere from 15-25% in excess of actual cost but the range seems to vary based on who you talk to and covers more than labor.
You can answer the question by simply looking at your last 10 or 15 residential projects (regardless of the subtle variances) to see what you quoted each customer (if adjusted to a cost plaus basis) and determine average total labor (or any other non materials) cost on a per sq ft basis.
- Contractor · AZ · Member since 2022 · 215 posts · 185 votes3y
Then a better question to start with would be "What's the average cost/sf for new construction?". With that information you can then adjust based on your design's location, size, complexity, and finishes, subtract off what you think your materials savings are, and then voila, there's your estimated labor cost.
The cost/sf question gets asked all the time on the BP forums so there are already a bunch of responses out there. Keep in mind cost/sf varies GREATLY based on a number of factors so unless you're getting bids based on your city-approved drawings, these numbers should only be used as "ballpark estimates" for analysis purposes.
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Matthew Paul:
Sounds like you are looking for an employee , not a GC . You can control your employee .
Actually, are you familiar with the term 'qualifying individual' as the term applies to general contracting or does it work different in the state where you are licensed?
Any business or corporate entity looking to execute residential projects on a certain scale (which is sort of a regulated activity) either has to obtain a license (for the entity) or contract/retain a general contractor.
The way the laws are written in some states, it doesn't seem you can just hire an 'employee' to supervise the project. There has to be a licensed person directly or indirectly involved with the builder supervising the project.
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
You're talking about an RMO or RME. Yes you can hire a person with a license but that is usually done just to get the license and what it gives you.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes3y
Quote from @Frank Greg:
@Matthew Paul:
Sounds like you are looking for an employee , not a GC . You can control your employee .
Actually, are you familiar with the term 'qualifying individual' as the term applies to general contracting or does it work different in the state where you are licensed?
Any business or corporate entity looking to execute residential projects on a certain scale (which is sort of a regulated activity) either has to obtain a license (for the entity) or contract/retain a general contractor.
The way the laws are written in some states, it doesn't seem you can just hire an 'employee' to supervise the project. There has to be a licensed person directly or indirectly involved with the builder supervising the project.
In Maryland you need a home builder license for new homes . Any idiot can pass the test , And a lot do . The hard part of being a GC is the relationships with subs
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Bruce Woodruff:
@Matthew Paul
@Ryan Normand
You're talking about an RMO or RME. Yes you can hire a person with a license but that is usually done just to get the license and what it gives you.
The term may vary based on the state (qualified individual, registered managing officer etc.).
More importantly, It seems the whole requirement for a state issued general contractor license only applies in certain states (coincidentaly most of the states we were looking at).
In about two dozen states (half of the US) apparently there is literally no state issued general contractor license requirement (especially for new construction) and hence no requirement for the builder or owner to obtain such license either. So all the fuss only really matters if you are building in a state requiring the license.
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Frank Greg:
Correct. Either way though, you will want to have an experienced person with a strong construction background to run your project. Doesn't matter what you call them......
And most people with said experience will be working GCs.....or if you get lucky, a retired GC that spent decades in the trenches. Find someone like that and make them your PM....
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Maybe in some states......in California, where I had mine, it was a 1 in 12 pass rate. Less than the Bar Exam (Although the material might be easier, or maybe not :-)
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Matthew Paul:
I doubt you will find a GC to do what you want , because he wont find any subs that will work as labor only . The electrician , plumber , HVAC , concrete , contractors ALL mark up their materials . Thats how you run a business .
Now if you are talking building a whole developement of 180 or so homes , you have some leverage and economy of scale . If you are talking spot lots building one here and maybe one there . To a GC you are nothing more than the average customer .
In my business ( currently building out a 90 home project in Oregon ) I hired the GC to build per door.. I control the money.. he gets a set fee per house plus a lot thats worth 250k at the end.
list of things I pay directly for:
1. Framing Lumber and Truss's
2. Windows
3. Doors and trim
4. Cabinets
5. construction stake out ( surveyor)
6. Clean up and on going construction cleaning final clean.
7. Porta potties 3 to 4 depending on how its going.
8. Street sweeping
And probably a few more I am not thinking about.
Dig out and utls are lump sum.
foundation lump sum he pays for the concrete.
Framer supplies his own nails fasteners and installs the windows.
roofer supply's all materials.
insulation supplies all materaisl
Plumber supplies all materials
Electrician supplies all materials
Painter supplies all materials
Fence supplies all materials
flat work supplies all materials.
counter tops flooring tile work are all one sub they supply all materials and one price.
thats off the top of my head. All money is controlled by us. GC is simply a pass through - Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Bruce Woodruff:
Correct. Either way though, you will want to have an experienced person with a strong construction background to run your project. Doesn't matter what you call them......
And most people with said experience will be working GCs.....or if you get lucky, a retired GC that spent decades in the trenches. Find someone like that and make them your PM...
Many seem to be using the retired GC's when looking to bring on a qualified individual; beneficial for both sides.
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
There is a difference... the general contractor is often primarily concerned with providing construction related services to the public for compensation. The developer or owner of the project is not necessarily in the business of charging for construction services but often gets roped into a GC license requirements as a builder based on how the laws are written wherever the development occurs.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes3y
Quote from @Frank Greg:
There is a difference... the general contractor is often primarily concerned with providing construction related services to the public for compensation. The developer or owner of the project is not necessarily in the business of charging for construction services but often gets roped into a GC license requirements as a builder based on how the laws are written wherever the development occurs.
That is true and in some states that can change by city , county , township , or whatever they call their areas . And the GC , knows who to deal with in their respective area . Thats what you are paying them for . By the time the customer figures out the local process and who he buddies up to and locates and screens subs etc , there is NO cost savings .
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
@Matthew Paul Yep....! ^^^
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Jay Hinrichs:
In my business ( currently building out a 90 home project in Oregon ) I hired the GC to build per door.. I control the money.. he gets a set fee per house plus a lot thats worth 250k at the end.Thanks for the post! The GC compensation is whatever you negotiate with the GC often based on the scope of responsibilities or project complexity. Various GC's can have varying levels of motivation and a plethora factors at any point in time that can affect this.
From what you posted you are still outsourcing quite a bit it seems but there isn't a right or wrong amunt of what you outsource. Just whatever makes $en$e for you.
If you were in a position to supply ALL the materials, what would you compensate the GC per home just for supervising project and construction personnel? Also are you allowed to say what the average home price for the 90 home development?
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Frank Greg:
@Jay Hinrichs:
In my business ( currently building out a 90 home project in Oregon ) I hired the GC to build per door.. I control the money.. he gets a set fee per house plus a lot thats worth 250k at the end.Thanks for the post! The GC compensation is whatever you negotiate with the GC often based on the scope of responsibilities or project complexity. Various GC's can have varying levels of motivation and a plethora factors at any point in time that can affect this.
From what you posted you are still outsourcing quite a bit it seems but there isn't a right or wrong amunt of what you outsource. Just whatever makes $en$e for you.
If you were in a position to supply ALL the materials, what would you compensate the GC per home just for supervising project and construction personnel? Also are you allowed to say what the average home price for the 90 home development?
My project is selling from 650k to 900k per home. the value of my GC is in all his sub contractors that he has been using for 25 years. Its all about the subs both in quality and ability to get the jobs done on time and correctly.. I know we are paying more than say a production national builder but our quality is so much better.. the folks that buy our homes are not looking for the best bang for the SQ ft price wise they are looking to have say in upgrades.. I am paying him 1 million to build all those houses.. but keep in mind I do all the accounting and pay all the subs directly he acts more as a site supervisor .. but he also has a stellar reputation so we get a lot of milage when we say its a XXXX built home can put a price on that.
However i have used this same model in Charleston SC for 600 to 2.5 mil homes ( built 40 homes) cant buy lots there anymore that make sense... FLA for 250 to 300k homes ( built 6 homes and was going to do more but will stop for now) Indy for 300 to 400k homes Only 4 and will do no more unless I find another GC the current one is not doing well and I am taking over the project . - 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Matthew Paul:
Quote from @Frank Greg:
There is a difference... the general contractor is often primarily concerned with providing construction related services to the public for compensation. The developer or owner of the project is not necessarily in the business of charging for construction services but often gets roped into a GC license requirements as a builder based on how the laws are written wherever the development occurs.
That is true and in some states that can change by city , county , township , or whatever they call their areas . And the GC , knows who to deal with in their respective area . Thats what you are paying them for . By the time the customer figures out the local process and who he buddies up to and locates and screens subs etc , there is NO cost savings .
Mathew, in Oregon you need a developers license to flip homes and to build new homes.. this only allows you to hire a GC to work for you. that license requires bonding and insurance but NO tests.. Keep in mind though not everyone can get bonded.. The GC you have to take a test for and if your just doing one off rehabs or builds thats all you need.. But like me when i have a subdivision that is in a separate LLC that LLC needs the developers license. plus the GC. So builders in our area that may have 5 subdivisions going in 5 different LLC's need 5 separate developers licenses.. Its just a money grab really. But its a 5k fine first offense.. Many many flippers myself included do not realize this in Oregon because its such a weird law .. but then find out when they get a notice from the state.. I mean I probably flipped 150 houses or more over the years before I ever heard about this developers license LOL.. But I have them all now. I have my developers on each project and I got my GC license.. the GC license is heavy to law so it did not take much for me to pass it.. there was nothing in it about how to build anything which i dont really know how to do .. - 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Jay Hinrichs:
the value of my GC is in all his sub contractors that he has been using for 25 years. Its all about the subs both in quality and ability to get the jobs done on time and correctly..And that is what it's all about that people never understand. You want subs on your job that literally 'belong' to the GC. It helps to ensure that you stay on schedule....
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Jay Hinrichs:
My project is selling from 650k to 900k per home. the value of my GC is in all his sub contractors that he has been using for 25 years. Its all about the subs both in quality and ability to get the jobs done on time and correctly.. I know we are paying more than say a production national builder but our quality is so much better..A GC with experience and subs in place who guarantees no material personnel turnovers, noshows or absentees resulting in dalays may have some value in some cases. They often just have convenience fees and other added charges which isn't always to the owner's benefit. I guess you would have no complaint if you still meet your target profit margins.
Sometimes you take control out of necessity. I have dealt with GCs in some markets where I wonder how on earth they are
still existing or in business. Most GCs are also not known for having a reputation or any particular incentive to control cost. The overwhelming psychology is to just charge it to owner.
Sometimes the 20 or 30 year of 'relationships' they reference as an item of value can in time evolve into a relationship of contractors, subs and suppliers, looking out for each other, not necessarily the builder or project owner interest. If you give a GC a budget, 99% of the time, they will max out whatever the budget is.
Labor can be scarce in some markets and some locations can be far from the major metro areas; all of which can enable some contractors to collude, stall at various stages and increase your cost significantly. So I often see nothing wrong with being able to pull of a project without over relying on a GC. - 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
@Frank Greg Man, you must have been burnt bad....or else you're just the suspicious type....
The reality is you just haven't found the right GC yet. Maybe your attitude turns them off....?
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Frank Greg:
@Jay Hinrichs:
My project is selling from 650k to 900k per home. the value of my GC is in all his sub contractors that he has been using for 25 years. Its all about the subs both in quality and ability to get the jobs done on time and correctly.. I know we are paying more than say a production national builder but our quality is so much better..A GC with experience and subs in place who guarantees no material personnel turnovers, noshows or absentees resulting in dalays may have some value in some cases. They often just have convenience fees and other added charges which isn't always to the owner's benefit. I guess you would have no complaint if you still meet your target profit margins.
Sometimes you take control out of necessity. I have dealt with GCs in some markets where I wonder how on earth they are
still existing or in business. Most GCs are also not known for having a reputation or any particular incentive to control cost. The overwhelming psychology is to just charge it to owner.
Sometimes the 20 or 30 year of 'relationships' they reference as an item of value can in time evolve into a relationship of contractors, subs and suppliers, looking out for each other, not necessarily the builder or project owner interest. If you give a GC a budget, 99% of the time, they will max out whatever the budget is.
Labor can be scarce in some markets and some locations can be far from the major metro areas; all of which can enable some contractors to collude, stall at various stages and increase your cost significantly. So I often see nothing wrong with being able to pull of a project without over relying on a GC.
there are no guarantees at our level.. If your talking large commercial multi million dollar contracts to build one building and the GC has his own personal JET then you can get into that nitty gritty at our level U try to control the best you can and hire who you trust - Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Bruce Woodruff:
Man, you must have been burnt bad....or else you're just the suspicious type....
The reality is you just haven't found the right GC yet. Maybe your attitude turns them off....?
More like the reality is you probably can't handle the truth or face the facts. Just like you have been trying to get into arguments about there being no GC whatsoever that can be hired to work on a limited scope of supervising a project and/or construction personnel when this is a practice that has literally been going on every day and has been in effect probably before you were born (well, maybe not you!).
Sure Bruce, my stellar attitude is exactly why the general contracting industry has a business model of charging the builder some % or fee plus cost to source for materials and labor. I am sure the thousands of disputes (which we read of on here) involving various time, cost and bungled delivery schedules all on the GC's watch is all because of my attitude.
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes3y
Quote from @Frank Greg:
Sounds like a personal problem. Owner doesn't have to explain why they are deciding to supply the materials. You know nothing about the project to be rambling about project success. Mistakes & Delays = Zero!
....other than 30 years of experience as a GC. LOl
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Jay Hinrichs:
there are no guarantees at our level.. If your talking large commercial multi million dollar contracts to build one building and the GC has his own personal JET then you can get into that nitty gritty at our level U try to control the best you can and hire who you trustSince you are paying your GC a straight $1 million (not including the throw in lot), that's a fee of about $11,000 per home or 1.2-1.7% of the stated home sales price. Might not be too bad a deal based on what the total project cost turns out to be and ETA for completing the project.
- Lender · rate.bid · Member since 2022 · 324 posts · 62 votes3y
@Eric James:
....other than 30 years of experience as a GC. LOl
Any experience with the Bee Cave area in Texas?
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Frank Greg:
@Jay Hinrichs:
there are no guarantees at our level.. If your talking large commercial multi million dollar contracts to build one building and the GC has his own personal JET then you can get into that nitty gritty at our level U try to control the best you can and hire who you trustSince you are paying your GC a straight $1 million (not including the throw in lot), that's a fee of about $11,000 per home or 1.2-1.7% of the stated home sales price. Might not be too bad a deal based on what the total project cost turns out to be and ETA for completing the project.
One million includes the lot. And that my friend for someone of his quality and reputation is what we call in the industry a SMOKIN deal.
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