On today’s show, we’re talking about math errors that some contractors make. These are simple errors to make, but ones that can cost you money.
There are many places where a contractor can hide expenses and it can be difficult for you to figure out where they are.
When you are dealing with high quality contractors, they will be transparent in how their bid was put together. They will clearly show what it costs for each division of work. There will be a line item for framing, for foundations, for site work. Electrical, plumbing, mechanical and so on. There will be somewhere between 15 to 30 separate line items. Then they will show you a line item for their fee, and a line item for what are called general conditions.
General conditions are the items that are needed on the job site that don’t pertain to any particular subcontractor. These are things like the perimeter security fence, rental of the portable toilets, rental of cranes, the waste material disposal and a portable site office. The general conditions are required to mobilize the construction team.
When there are problems in a quote, it’s usually because there is an error in one of the underlying calculations. I take the time and double check the math to make sure it’s correct. For example, I will divide the cost for flooring by the floor area and make sure that the correct rate is in use. Sometimes there is an error. Sometimes the error is in the materials, and sometimes it’s in the labour.
Let’s start with the material allowance. Let’s say you have a room that is 10 feet by 10 feet. We would agree that the room is 100 square feet.
Most people would also agree that you need to purchase more than 100 square feet of material to cover that floor. The cuts won’t match the room exactly and you will have left-over pieces that are too small to use. The usual material allowance is about 10% above the floor area or the wall area. But if you have irregular geometry, the material waste can be even higher.
So let’s say that the tile contractor purchases 110 square feet of tile. I’ve seen that same tile contractor charge for 110 square feet of tile installation. That’s mathematically incorrect. There’s only 100 square feet of floor area. They should charge you for 110 feet of tile material and 100 square feet of tile installation. If the tile comes in boxes of 15 square feet per box, then your will purchase will need to be 120 square feet of tile, because 105 square feet of tile probably won’t be enough. Will the contractor now charge you for 120 square feet? Again, they need to charge you for the exact floor area when it comes to installation, not more.
Then there’s the contractor who charges you for their insurance as a separate line item in the project. If its a large project, then its absolutely fair for the project to bear the burden of the builders risk insurance. But if you’re paying for the builders workman compensation insurance or the builders general liability, and then paying for it in general conditions, that’s double dipping.
Sometimes, the contractor will calculate the labour component based on the materials and not the actual area or length shown on the drawings. That extra is a little bit like the waiter in a restaurant who charges a service charge of 15% and then gets another 15% tip. It’s double dipping. I can tell you that the addition of 10%-15% in cost on a project can make the difference between a viable project and one that’s not.