Not really. Let’s break this down.
The general contractor (or “gen con” as commonly referred to here”) oversees the entire construction project. He’s the main guy, the director. He’ll come up with the estimate costs of the project, plan out the project, assemble his team of workers (or “sub con” as commonly referred to here), which he’ll hire for specific aspects of the job. Kinda like George Clooney in Ocean’s Eleven.
Or Gaia in Captain Planet and the Planeteers. She gave 5 rings to selected youth across the world, each of them with a unique attribute in order to summon Captain Planet to stop evil people from throwing bottles into the ocean which kill dolphins.
You get the idea.
1. He’s got to share the loot
The general contractor has to pay the subcontractors for their service and expertise. Examples of sub-contractors are plumbers, roofers, electricians. They’re pretty important.
I mean, George Clooney had to reward the Amazing Yen in Ocean’s Eleven with a mansion in Florida, and all he had to do was squeeze into a box.
So that’s one contributor to the general contractors’ costs- Paying his team their share of the loot.
2. He could be a master level contractor
The skill, reputation and experience of the general contractor might also contribute to his charges.
Master level general contractors are super skilled in:
- all aspect of home remodelling
- all types of building materials needed
- exact number of workers required
- time required to complete
- sequence of work
- building permits required
If he’s really skilled at this stuff, he’s probably a little more expensive. You probably want to hire a contractor who has a pretty good understanding of these things.
3. He’s got overheads so his mark up isn’t entirely profit
Remember not to confuse mark up in the quotation or final invoice with profit. Mark up isn’t always profit.
Let’s say your contractor has a 1.50 mark up. That means if the estimated cost for a job is RM10,000, they’ll multiply the RM10,000 x 1.50 and arrive at a RM15,000 sales price.
You think contractor is going “muahaha RM5,000 profit”
Your contractor gets RM5,000 to pay their own overhead expenses and make a reasonable profit. What overheads?
Well like any other business, a contractor has to pay for his own salary, advertising, sales commission, job supervision (which isn’t usually a job cost), office expenses, insurance, accounting and legal fees, licenses, taxes, employee expenses. These are just a few examples of their overhead expenses. His profit is probably a lot less.
Any business must make a profit or it will sadly disintegrate, and lives of actual people could be miserable. The one veg, one meat rule at an economy rice shop becomes a luxury. If a business can’t cover overhead expenses and make a reasonable profit, the contractor might not even be able to finish your renovation project.
So, how should you manage your contractor to make sure you don’t get ripped off?
- Keep everything above in mind
- Be clear about what you want very early on and give them realistic well defined goals
- Read the contract thoroughly, discuss the details, and speak to the contractor if you have any questions
- Analyse his quotation and get a detailed breakdown of his charges. Speak to him about what exactly he’ll be spending on
- Find out what materials he’s using and how much they cost.
- Compare against a few other contractors then decide which guy you think is giving you the best prices, in light of his experience and skill. Also, once you’ve decided on someone, be sure to let the other contractors know if you don’t need their services anymore. It’s courteous and polite to do so. They’ve spent time and money to introduce themselves to you and provide a quotation.
We at Kaodim hope this helps give some context with respect to contractors’ charges and how you might be able to manage your relationship with contractors for your next home renovation project.