I've used a subcontractor for a specific need on a construction staking job. There is no provision for that in my contract. The work was specifically requested by the contractor and they did understand that this sub was to be used.
I figure to have this sub bill me (should be around $2k), then to mark up their charges some and bill the client. But I don't have a feel for how much is fair.?ÿ ?ÿ15% has been suggested. I was thinking 10%. What say you?
We need to purchase a product from an Arizona company.?ÿ They don't have a California seller's permit so we can't order from them.?ÿ We asked a local company to quote the product.?ÿ They took the Arizona company's cost and marked it up 10%.
But one quote isn't good enough.?ÿ So we've asked other suppliers, one declined.?ÿ We are asking fence contractors.?ÿ Essentially it's a competition to see if some other company is willing to be a pass through for less than 10%.
I've used a subcontractor for a specific need on a construction staking job. There is no provision for that in my contract. The work was specifically requested by the contractor and they did understand that this sub was to be used.
I figure to have this sub bill me (should be around $2k), then to mark up their charges some and bill the client. But I don't have a feel for how much is fair.?ÿ ?ÿ15% has been suggested. I was thinking 10%. What say you?
Have the sub direct bill the contractor...and Charge for Your Time administering that sub.!
If it Must go thru your books, 15% is normal/fair...
Have the sub direct bill the contractor...and Charge for Your Time administering that sub.!
If it Must go thru your books, 15% is normal/fair...
It is my desire to keep this sub at arms length from the contractor, because I intend to provide these services to this contractor, and others, myself in the near future.
I generally use 15%.?ÿ Fortunately, I don't have to do this often.
How much will you be charging for this in the future? Charge them that rate, unless it is less than want you owe the sub contractor.?ÿ
I'd use 20% or my hourly fees if it amounted to more money.
10% is a pretty standard markup on subconsultants around here.?ÿ Although, it sounds like this is in the construction side where 15% for overhead and profit is pretty standard.?ÿ?ÿYou're really not talking very large sums of money, only $100 difference between 10% & 15% on a $2k bill.?ÿ I would start at 15% and see what happens when you submit the pay app.?ÿ
I've struggled with this concept over the years - 10%, 15% ... markup, what does the client get for paying this extra? Perhaps the cost of the middle-person's administration, but then at say 10%, why would the admin cost on a $10000 fee = $1000 be any different to the admin cost on a $1000 fee = $100.?ÿ
So the only thing I could think of was compensating the middle-person for the cost of financing it, until paid back, and arrived at a figure of 2.5%, on the basis of the value of borrowing or potential investing the money at 10%p.a. divided by a reasonable realistic contract payback period of 4 months. Have used this in a few contracts, on the basis that if the contractor wants to charge more, they can include it elsewhere, but at least for valuing variations, the 2.5% stands.
markup, what does the client get for paying this extra?
They get the benefit of not having to negotiate another contract, process another invoice, take another coordination call, ect.?ÿ It's not just the cost of?ÿmoney that should be?ÿconsidered in the markup it's the cost to actually manage that sub as well.?ÿ Unless you're able to get your management time?ÿbroken?ÿout and?ÿbill it?ÿhourly?ÿas was suggested?ÿabove.?ÿ In Norman's example at 15% I would?ÿneed to spend?ÿless than 2 hours total dealing with this sub in any capacity whether it be contract, scope or invoicing.?ÿ?ÿ?ÿ?ÿ?ÿ?ÿ?ÿ
Don't forget the incremental cost of liability exposure.?ÿ If the sub screws up, the damage claim is coming to you first.
We use 15% nominally - may drop it to 10% on large projects or for repeat customers.
At least 20% your books, your tax liability, your liability.?ÿ
?ÿ
Don't forget the incremental cost of liability exposure.?ÿ If the sub screws up, the damage claim is coming to you first.
The sub is not licensed. Any professional liability is mine and mine alone.?ÿ?ÿ
The sub is not licensed. Any professional liability is mine and mine alone.
That doesn't alter the fact that you're incurring an increment of liability due to a reduced span of control over the sub's work.?ÿ Unless you have complete control over him, in which case the IRS would like to speak with you about the definition of "independent contractor."
Don't forget the incremental cost of liability exposure.?ÿ If the sub screws up, the damage claim is coming to you first.
The sub is not licensed. Any professional liability is mine and mine alone.?ÿ?ÿ
Last time I did this (maybe 10 years ago) it cost my E&O provider about $35k.
I didn't see where the OP indicated the sub?ÿwas licensed or not.?ÿ Being that it's some kind of construction work that distinction might not even be relevant.?ÿ What would be important is if that sub has GL and E&O insurance.?ÿ I wouldn't take the risk in hiring them if they didn't.?ÿ
That doesn't alter the fact that you're incurring an increment of liability due to a reduced span of control over the sub's work.?ÿ Unless you have complete control over him, in which case the IRS would like to speak with you about the definition of "independent contractor."
Understood.?ÿ That is, after all, a big part of the justification for the markup. For the record, the work has been well checked (for a fee) and I'll sleep fine with degree of risk involved. I'm just not comfortable with assuming it for nothing.?ÿ ?ÿ?ÿ
?ÿ
What would be important is if that sub has GL and E&O insurance.?ÿ I wouldn't take the risk in hiring them if they didn't.?ÿ
I don't think that an unlicensed person can get E&O. Am I wrong?
I don't think that an unlicensed person can get E&O. Am I wrong?
You're probably right however my point wasn't the specific type of insurance so much as the right type of insurance that would cover whatever work or service they were doing for me.?ÿ If they're not a legit company with their own insurance to backup their work I wouldn't hire them as a sub, neither would the GC.?ÿ