To sum up, based on the study results and the results of interviewing Sr. Humphreys, who is the senior estimator in G.L.Y Construction with 19 years of experience, it seems that the ratio of the general overhead to the total revenue is fluctuated from year to year as total revenue changes. In general, based on how many projects the company has in a year, we determine a target ratio that we shoot for, which is about 5-6% or less in some cases.
According to Humphreys, GLY Construction does not usually allocate general overhead costs to the construction projects unless it is related to the project. The essential reason for not allocating the general overhead to project is GLY Construction is an open book with almost all of their clients. However, in case they are off on their GC’s then we either have to ask the owner for more money. This situation comes out of contingency or it comes out of our fee.
Basically, the general overhead …show more content…
By this, in the public bid market general contractor have to lower their project overhead costs as much as possible. Otherwise, they will lose the opportunity to get the project, which means the company will lose money.
Adding more costs of home office general overhead to the project cost, as between fee and overhead may lead to lose the project because of the high price. In other words, this is the difference in winning and losing a project. Therefore, to cover the general overhead costs, GC has to find another way to generate these costs. For example, if the GC has available equipment in his yard, he tends to rent it to other contractors or projects to get paid. Another way to get the overhead costs covers is doing small jobs for valued customers in order to look forward for the long-term
According to Humphreys, GLY Construction does not usually allocate general overhead costs to the construction projects unless it is related to the project. The essential reason for not allocating the general overhead to project is GLY Construction is an open book with almost all of their clients. However, in case they are off on their GC’s then we either have to ask the owner for more money. This situation comes out of contingency or it comes out of our fee.
Basically, the general overhead …show more content…
By this, in the public bid market general contractor have to lower their project overhead costs as much as possible. Otherwise, they will lose the opportunity to get the project, which means the company will lose money.
Adding more costs of home office general overhead to the project cost, as between fee and overhead may lead to lose the project because of the high price. In other words, this is the difference in winning and losing a project. Therefore, to cover the general overhead costs, GC has to find another way to generate these costs. For example, if the GC has available equipment in his yard, he tends to rent it to other contractors or projects to get paid. Another way to get the overhead costs covers is doing small jobs for valued customers in order to look forward for the long-term