Construction Overhead & Profit

Introduction

It's important to understand and keep in mind that general contractors are a business, and while they build buildings, their primary purpose is to make money. This page investigates general information about what to expect for costs and business related expenses. It is common on larger projects for the general contractor to submit billing requests to the Owner, which are required to be approved by the Architect. The Architect must verify that the statement of % completion of work is generally correct.

While this page goes into definitions with regards to a Contracting business, many of the pieces can be translated to Architecture firms without issue. Keep in mind that as times and technology change, so does the amount certain companies bill, or to put another way– are able to bill. These are not rules and rather a good starting spot for assumptions and definitions for how they relate to one another.

Overhead

Overhead costs usually include all the general costs of operating and maintaining a contracting business plus all project expenses that are not included in material, labor (payroll and payroll taxes), or equipment costs.

• Overhead costs vary greatly with the size of the contractor’s operation.

  • A contractor working from home with no advertising would have much lower overhead than a large corporation which advertises and has building space.

Total Overhead

General Overhead + Project Overhead. Actual amounts depend on the locality of the project and type.

• Equals about 10-20% of the total cost of labor, materials, and equipment.
• 5-20% of the total construction cost
• 10-40% of labor costs