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Overhead Cost Examples

3 replies [Last post]
Wed, 2009-07-15 04:37
Mark Huggett
User offline. Last seen 15 years 19 weeks ago. Offline
Joined: 15 Jul 2009
Posts: 3
Groups: Civil Engineering
Hi,

I’m trying to find some information to justify the overhead costs (Project Management & Controls) on a project. Does anyone know of a source of sample construction project cost data? Or an industry standard for what overhead cost usually is as a percentage of total? Or even some text book information on what the percentage should be! The number I keep seeing banded around for profit and overhead is 15%...but I need some justification for why this is roughly correct.

Thanks in advance...
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Replies

Wed, 2009-07-15 13:02
#1
Rafael Davila
User offline. Last seen 1 week 6 days ago. Offline
Joined: 1 Mar 2004
Posts: 5241
Groups: Spider Project Team
Mark,

I AS PERCENTAGE OF TOTAL PROJECT COST FOR INITIAL BUDGETING – NOT FOR CHANGE ORDER NEGOTIATIONS

If you are looking only for Project Management and Control Services as a percentage of total Project Cost some cost reference books can provide you with these, at home we usually use RS Means. Their range will vary among type of jobs and total Construction Cost. These are professional services usually negotiated on an hourly basis, might vary from 2% up to 5%, in occasions even more depending on the complexity of the job.

The 15% Profit and Overhead is a markup to your Job Costs that do not include Job Overhead costs; these are considered under your Job Costs.

II FOR CHANGE ORDER NEGOTIATIONS OR A CLAIM

If for a Change Order negotiation or a Claim under your Contract you should look at the specifics under your contract. Some contracts do allow for Project Overhead as well as for General Office Overhead to be included under a Change Order. Other contracts only do allow for Project Overhead Only, this can be an issue of much debate. It is common for some Contracts to define in detail what allowable overhead is. For deductive change orders there are also special rules that might be applied. You are bound by the terms of your agreement unless Common Law overrides.

Best regards,
Rafael
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Wed, 2009-07-15 05:28
#2
Dieter Wambach
User offline. Last seen 7 years 31 weeks ago. Offline
Joined: 15 Jan 2007
Posts: 1350
Groups: Petro-Chem / Oil & Gas, TILOS
Mark

Welcome to PP.

For the term have a look here:
http://www.aacei.org/technical/rp.shtml#10S-90
"COST ENGINEERING TERMINOLOGY"

If you’ll read their definition you’ll find some examples within your project.

Good luck!

Dieter
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Wed, 2009-07-15 04:48
#3
Mike Testro
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Joined: 14 Dec 2005
Posts: 4418
Groups: Building Information Modelling, Content Moderators, GPCCAR Editors
Hi Mark

If you are considering loss and expense for delayed work then you have to establish what the actual cost was.

You need to go to the cost records to establish this for the period when the work was in delay.

Look for site supervision - standing plant - site office rentals - phones and faxes - off site storage etc.

It is very tricky to claim loss of profit - even using Emden or Hudson formula you have to get through at least 5 hoops to stand any chance.

If Ken sees this thread he will give you a better idea.

If you do not have this information then you will have great difficulty justifying your claim - industry standards or best estimate will not work.

Best regards

Mike Testro
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