Is a Project Management Fee Standard for Contractors?

Question

I'm working on a deal and a quote from one of my contractors has a project management fee included in there. In the BP community's experience, is that a standard line item for most contractors? I've seen budgets with and without it.

David Robertson · Answer

Hi Paul,

All contractors estimate their overhead & profit a little differently.

Some contractors markup their total project estimate by a % of the job to account for their overhead costs which is evenly distributed across the entire estimate.

Other contractors itemize their overhead & include it in their job estimate.

I imagine your contractor is doing both, and has itemized certain overhead items in his estimate and then included a % of profit that is evenly distributed across the estimate.

Either way, Project Management is a job cost that should be included in the estimate, it doesn't really matter whether it is estimated by a % or itemized, it will cost you the same.

I imagine this is why contractors don't like itemizing their estimates, because often times clients get too nit picky :)

If you really think his # is unreasonable, get another quote.

Brian Pulaski · Answer

I agree that you would pay that cost whether he itemized it or carried it in all of his other numbers. My question would be, is his bid close to the others you got? Is he the lowest bid? If the lowest, are you ok paying this "fee"? is he a GC or a single scope contractor?

Thomas Ruf · Answer

Paul, I agree with David Robertson's comment on contractors building in their profit in multiple ways. This is my experience as well. The only way you'll ever know what they are making is if you both agree on full transparency. Meaning, you get all receipts for all materials on the project and have agreed to a % or flat fee for service. I've found very few who will do the % and many that want the flat fee (often times fee is more like a lawyers hourly wage - ridiculous).

Paul Smythe · Answer

@Nino Alfano while I do appreciate the transparency by the contractor, I'm more curious about whether it is a normal line item. I was under the impression that a contractor will add a little padding to each line item so they can get their check. I'm just trying to figure out if them also adding a management fee is excessive or if it just the standard.

Is a Project Management Fee Standard for Contractors?

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