Left Seater wrote:smackaholic wrote:
Don't really know enough about the entire process other than what lefty said rather well. Much of what the gubmint contracts out is pretty damn complex and to even try to make a cost estimate is ridiculous. The best way to do such things is on a cost+ basis.
I will admit that determining "cost" is certainly a tricky proposition.
This is yet another reason why the best policy regarding gubmint expenditures, be they on private contractors or civil service hacks, is to ask, should they be doing it in the first place?
I think the answer to that question in a large majority of cases is "fukk no".
Smackaholic,
In reality it is pretty easy. Say you are bidding on a contract to replace the windows in an FAA control tower. The contractor will estimate the number of windows a crew can replace in a day. That tells him how many days it will take. Then he adds up the cost for the new windows, the lifts needed to get the men and glass up there, the seals, etc. He then submits that as a bid. Government then awards a contract.
Now lets say that when his crew is working on replacing one of the windows they find cracks in the framework holding the window in place. They put together a new estimate and submit that to the gov as a change order. The gov then either approves making the new repairs and therefore increases the scope of the project, or it doesn't and provides the contractor with a written waiver for the area not repaired.
At the end, you add up the labor and materials and then multiply by 1.X. X being the profit agreed to in the contract.
Easy ?? Hell no....
First off you have to make damn sure you have the job broken into the right classifications as far as labor goes. Labor can have 6 or more different functions in one day for one person, with the average about 3 in our case.
1- Laborer on 45 hp tractor= $ 42.00 man hour wage and benefit package. If he moves up to a 85 hp backhoe, the wage rate goes up another $ 5.00 per hour. If the man goes to the 85hp backhoe for 15 minutes, you can either try and break that out and track it, or just put in the bid for the total hour, eliminating the tracking fucking nightmare.
If he goes back to installing drains or sprinklers, the rate goes back to $ 19.32 per hour.
We look at the job, and estimate it in our software for x number of hours, in the different wage classifications, and then add 5% more time. We estimate the total number of equipment hours, regardless if that bitch sits in the marshaling yard or is working. We add an administrative person one day per week on the job per 3 workers on site, for handling the extra certified payroll bullshit and the excessive paperwork required by the government. We arrive at our total COST to us to perform the job.
We then mark the job up a minimum of 1.35, our normal private funded markup. Depending on the market, if our competitors are tied up on other jobs, and my experience with that particular agency or general contractor, I usually add up to another 35%, since I am going to have to carry the job for 45 to 60 days before my first check, and 45 to 60 for the next one, the next one. In our small business, that means I am carrying 30K for 45 days, plus making sure I have enough cash to cover the other expenses in that time frame.
So you now have the job marked up about 1.70. Prevailing wage usually adds 30% on labor cost ,and we step on the margin at least 15% more on prevailing wage government jobs, so you now have a total inefficiency of at least 45% versus a private funded and built project.
Efficiency of stimulus dollars??
Enter the change orders. The contract usually sets the limits on the markups on change orders to 10% on labor, 12% on overhead and 12% on equipment, or somewhere in that range .So we run into a change order situation say, requiring 4 man hours. Since we are already contracted on the job, the GC really has no choice but to accept our change order process. If I write the CO for the 4 hours with that markups, I am breaking even. That simply is not going to happen on the change order. I need to get the margin back up to the 1.75 markup, so I am saying it will take 12 man hours with those markups and I am back to my needed margin.
Change orders can make you a lot of money, but you never write them for anything less than 2 to 3 times what it will actually take. We also run into more admin costs on tracking processing and trying to get paid on the change orders.
So that is how the stimulus will help bring our economy back. Get that money working in the private sector, and you will get 35% more value at minimum versus these prevailing wage jobs. I would rather do private work or non PW work over PW work any day. We make lower overall margins, but can execute about 2 to 3 times the same amount of work in the same time period, and make more margin, in the same time period.
Stimulus and all the PW work it will bring is not a very good value. Been there and done that. We are still waiting on the final payment on a PW job completed in November, and change orders we wrote in October. So if they make me carry that $ 16,000 for that long, you can be damn sure I am going to make a good margin on it. Fuck them. I bid these jobs so high, I get about every 8th one, but its a fucking payday when we do, and it has to be.
