Time and Material billing questions

When you guys and gals bill a GC for work done time and material do you show profit and overhead as a separate line item? I once showed a client my worksheet for my bid and the first thing that they zeroed in on was the 15% profit and overhead. They decided to do the job time and material and it cost them 500 more than the bid price. My point is that Profit and overhead has the potential to attract a lot of attention but it is real and should be accounted for. So do you people show it or build it in the other numbers like your hourly rates? Thanks for your time.

I add it into each line item on a structured bid.... or add it into the hourly rates if that's the method of quoting. And yes you are 100% correct, profit and overhead need to be accounted for.

My client never sees my profit and overhead as a line item. I also don't show them receipts for materials. I build it into the costs they get billed for, but don't show it separately. I learned early on if it's shown separately that's the first thing people want to "discuss" and whittle on.

John

Hey, Jim Dandy. I would never show profit and overhead as a line item just add it to the Time or material costs. Hope it helps you.

How can you not provide receipts for materials included in a t&m or cost plus contract? The whole essence of the deal is transparency for the ownership group. We provide our employee timecards, the t&m equipment daily and all receipts plus our markup and the end of the billing cycle. It is provided in a link with the first pages being the invoice then the daily's then the employee timecards. After that all trucking and landfill tickets are included along with ALL receipts for any material purchased for the job. We make a markup on material and profit and overhead is considered in our equipment rates. We have been very successful using this method on difficult jobs or owner's that just make a lot of changes. providing all of that backup is how we get paid. So take of it what you want, but it works for us.

Kind Regards, CD

Colorado Digger said:

....... and all receipts plus our markup and the end of the billing cycle......

Click to expand...

So you show a markup on material on your bills? Are you required to collect and forward the difference in sales tax based on your markup doing it this way? I have been told to avoid breaking out material separately because of this.

Typically I try to avoid doing anything but small jobs T&M. But either way all bids and bills don't show profit, overhead, or material. All it shows is a description, procedure or service and how much that cost.

We pay sales tax when we buy material. Then it gets marked up. You don't provide a broken out estimate with all of the material to be provided? I'm not sure of what type of work you do but all of our estimates are line item broken out, down to sewer cleanouts and nyloplast inlet boxes

Correct you pay sales tax on the amount you pay for it, but then you resell it at a higher price correct? The way it was explained to me was if you buy an item for $100 then resell it to the customer for $110 then you be responsible for the sales tax on the $10 difference. This could be a commi-fornia thing or it could be complete myth also...... Like I said I don't deal with this and on paper have no markup on material.

As far as what type of work I do, the list of things I don't do would be much shorter. Design and build houses, excavating, septic systems, plumbing, electrical, concrete, ect.
I'm not sure I follow what you mean by "line item broken out". Our bids are typically broken out into procedures. For example, a bid for a house would start with designing it = price, rough grading = price, footings forms and rough plumbing = price ect..... Depending on the size of the project we group stuff differently to keep from being strung out to far without getting a check to help minimize risk. So for instance if a particular project had $100k of rough grading we would break it up into smaller procedures.

Yair . . . Different country and circumstance but on normal hourly rate work on (say) a $200,000.00 trawler refit the client gets a transcript and summary and the often greasy originals of the employees timesheets.

Equipment hire such as cranes is itemised along with an itemised account of every part, nut and bolt welding rod, grinding disk and bottle of oxy/acetylene used on the job . . . our mark-up was irrelevant . . . the client does not need to know our buying power and, in fact, we encouraged clients to supply their own parts/consumables . . . one outfit electing to supply their own steel for otter-boards missed the last truck before the road shut down for the wet season found it was very expensive to fly in six by one flat bar by DC3.

If it is a firm quote (very rare) he just gets bills for progress payments that add up to $200,000.00 at the end of the job . . . the details are none of his business.

Cheers.

I'm not certain of the definition of "time and material" jobs, but if I'm billing a project hourly I mark up any material 10%, my hourly rates have a margin in them, then I mark everything up 5% for overhead. I am never afraid to show my mark up though. I like to explain to prospective clients, that I do this for money, not fun, and they don't want me doing their job if the terms are such that I will not leave with more money than I showed up with... no one will be happy if thats the case. One important distinction to make here though, is that showing a markup of say 20% on the cost of the job is actually not showing your profit... it's showing your GROSS margin... if you are marking up you prices by 20% your NET margin (profit) will actually be a substantially smaller percentage in most cases. The trick to explaining that concept to a client is having a real grasp on what your overhead really amounts to, without that it can look like highway robbery. My profit margin is not a secret to me though, I simply explain that I have yet to get rich doing this, but I have lost money doing this before and I'm not interested in that exercise anymore, so here's the price... take it or leave it.... I'm sure there are 5 guys out there who would take the job for 20 percent less, but if you want me to do the job, this is what it will take.

I never show a separate line item on a T&M bill that's O&P.

Basically I work the invoice up in a spreadsheet and add an extra column to the right of the subtotal for O&P mark-up, usually 15% on materials and subs, the equipment hourly rate has it included. When the invoice is finished, hide the two columns to the left leaving only the column with the total that includes O&P, save as PDF and print or email. That provides a line item list and a total price per line item.

Now I rarely do strictly T&M where a price was not given before hand for the work. The majority of my contracts are hard number with unit costs for changes, like import and export per CY. When a change comes along that is not already spelled out with a unit cost, I price it the way I described above.

I do a fair amount of bush hogging for a developer on his properties and that is strictly by the hour and the hourly rate includes O&P.

My hourly rates include everything but materials. If the customer pays for materials directly, or prepays me for them, I don't mark the materials up.