ConstructionPro Week, Volume: 2 - Issue: 39 - 09/27/2013

Do You Maintain the Distinction Between Overhead Items?

By Bruce Jervis

 

Contractors frequently speak of, and even account for, their overhead costs in a loose, generic manner. Job site or field overhead is very distinct from home office or general and administrative overhead. Yet when pricing work, contractors may apply a single percentage markup to direct costs.

 

There is a flaw in this approach. The methods for proving entitlement to field overhead differ from the methods for proving entitlement to home office overhead. The calculation of damages differs as well. When contractors treat overhead as a unitary item, problems arise. This was illustrated in a recent case from Ohio.

 

The project owner granted the contractor a 120-day extension of the performance period and a lump sum price increase to cover “extended general conditions” for that period. The contractor was delayed beyond the extended completion deadline. There was a dispute regarding overhead costs. Did the prior price adjustment establish a daily rate for field overhead, home office overhead, or both combined?

 

Do you always maintain the distinction between field overhead and general and administrative expenses when pricing bids or changed work? Do your accounting and job cost records reflect that distinction? I welcome your comments.

 

COMMENTS

Dear Sir, Is there any time-range law for the contractor to submit the extended time price increase for the overhead charges, after the completion of the contract time period?. What if the contractor asks extra for such delayed time performance at the end of the project which is completely caused by the Owner, and also if such extra cost is not agreeable with the owner due to the high cost of charges? Please let me know the law about this matter.
Posted by: Dilipkumar J.Shah - Friday, September 27, 2013 12:00 PM


Thank you for the good writeup. It in fact was a amusement

account it. Look advanced to far added agreeable from you! By the

way, how could we communicate?
Posted by: Tomkinson - Tuesday, February 25, 2014 7:27 AM


 









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