Holloway Consulting provides Construction Consulting Services to subcontractors in most or all construction trades – civil, structural mechanical electrical, etc. This page is aimed at subcontractor considerations related to their change order request (and any future claim) overhead rate analysis during the pre-construction phase:
Construction Subcontractor Consulting Services
Pre-Construction Phase Risk Reduction
Overhead Rate Analysis
Another early task for the subcontractor to accomplish is the establishment of an overhead rate to apply to change order markup. This rate should be broken down into two overhead cost categories:
1) Labor related costs, and,
2) time-related costs.
The labor-related number should contain as many items of subcontractor overhead costs as possible since most changes will affect labor. The time-related number is for additional application to change order markup that have time extensions involved. Subcontractor overhead cost items that should be considered when deriving these rates are as follows:
Supervision, engineering, job office, travel and subsistence, ground rental and leases, telephone and telegraph, safety and first aid, photographs, professional services, travel pay, health and welfare fund payments, pension and vacation fund payments, financing costs, miscellaneous and general expenses, equipment and property insurance, auto and truck insurance, specific risk insurance, health and accident insurance, licenses and permits, sales and use tax on equipment, site preparation costs, office maintenance, shops and sheds maintenance, power installation and distribution, communication systems, water system, hand tools and supplies, small equipment, power, heat, drinking water, autos and pickups, miscellaneous hauling, move-in and move-out expenses, payroll levy on overhead and contract bond expense.
In short, every subcontractor cost that will or might increase if the job is extended beyond the original completion date, or if additional labor is required, should be considered in the subcontractor’s overhead rate analysis.
One of the reasons that we advise our subcontractor clients to perform this overhead cost analysis is that if a subsequent disagreement or dispute arises with the general contractor and/or owner over the costs and components of change orders or claims, all applicable components should have previously disclosed. Unfortunately, we often see subcontractors submit unsuccessful change order requests and claims seeking recovery of unbudgeted overhead costs.
Contact us about your project.
The Holloway Consulting Group, LLC
Subcontractor Construction Experts
12081 W. Alameda Pkwy., #450
Lakewood, CO 80228-2701
Denver Phone: (303) 984-1941
International Toll Free: (888) 545-0666
Fax: (303) 716-0432
Email: steve.holloway@disputesinconstruction.com
Blog: disputesinconstruction.com
Web: hcgexperts.com
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