Subcontractor Cost Estimator
Calculate the total cost to hire a subcontractor, factoring in labor hours, material costs, overhead rate, and desired profit margin.
Formula
1. Labor Cost = Labor Hours × Hourly Rate
2. Direct Cost = Labor Cost + Material Cost
3. Overhead Amount = Direct Cost × (Overhead % ÷ 100)
4. Cost Before Profit = Direct Cost + Overhead Amount
5. Profit Amount = Cost Before Profit × (Profit % ÷ 100)
6. Pre-Contingency Total = Cost Before Profit + Profit Amount
7. Contingency Reserve = Pre-Contingency Total × (Contingency % ÷ 100)
8. Total Bid Price = Pre-Contingency Total + Contingency Reserve
9. Effective Markup on Direct Cost = (Total Bid Price ÷ Direct Cost − 1) × 100
Assumptions & References
- Overhead is applied as a percentage of direct costs (labor + materials), covering insurance, equipment, supervision, and administrative expenses. Industry overhead rates typically range from 10–25% (CFMA, 2023).
- Profit margin is applied to the fully-loaded cost (direct + overhead), not just direct costs, which is standard practice in construction bidding (CSI MasterFormat guidelines).
- Contingency reserve is applied last, on top of the full bid price, to account for scope creep, unforeseen conditions, or price escalation. A 5–10% contingency is common for subcontractors (AGC Best Practices).
- Labor rates should reflect the all-in rate including payroll taxes, workers' compensation, and benefits if not already captured in overhead.
- Material costs should include delivery, waste factor (typically 5–15% depending on trade), and applicable sales tax.
- Reference: Construction Financial Management Association (CFMA) Financial Survey; Associated General Contractors of America (AGC) Project Delivery & Contract Administration.