Hello, everyone.
This is Enta.
Do any of you have a concept of a "fair price"?
For example, what would be a good price for sheet metal installation, or how much per meter for drilling?
There are still times when even I get confused, lol.
In my case, I review the design specifications and prepare a cost estimate for the portion of the project our company is contracted to handle.
After calculating the total cost, I check the general contractor’s winning bid price. Or I ask the general contractor what the winning bid rate was, lol.
If the portion of the project awarded to our company is 1 million and the general contractor’s bid success rate is 90%, the general contractor’s contract amount will be 900,000.
If this amount is exceeded, the general contractor will end up operating at a loss.
So this is the upper limit for a subcontractor, then.
Once you understand that, the next step is to create a budget.
In my case, when the legal limit was 1,000 m², all I had to do was enter "1,000" into an Excel cell, and the system would instantly calculate the materials and other details.
So the results are generally similar, but we adjust the loss rate based on the shape of the site.
We also need to factor in potential losses due to construction delays, but this is, after all, the operating budget. This amount represents the baseline (minimum).
We will determine the quoted price based on this.
In the case of a second-tier subcontractor, we first calculate, based on the design price, a rough estimate of the first-tier subcontractor’s (our prime contractor’s) branch expenses, head office and branch expenses, and profit.
This is just a rough estimate, but for major companies, you can generally expect branch expenses and head office/branch expenses combined to be around 10% to 13% lol (it varies by company).
On top of that comes the on-site profit margin. Roughly speaking, it’s probably around 2–5%.
You need to be careful here, since this is the top-tier secondary subcontractor.
Prime Contractor's Bid Win Rate + First-Tier Subcontractor's Profit = Second-Tier Subcontractor's Contract Upper Limit
Of course, the general contractor also needs to make a profit, so the price will be a little lower, but that’s the general idea.
When you think about it, the "fair price" would be the fair price for that particular situation, right?
Conditions vary from site to site. The loss rate also varies.
Despite that, there are still some general contractors who say things like, “We have a rule that we can’t pay more than 400 yen per sheet of lath,” lol.
It can be a bit of a hassle, especially at large companies that have a purchasing department... (Field employees are struggling with this too, by the way.)
The purchasing department makes decisions based solely on money without even looking at the actual site—they’re just like robots, lol. They’re completely inflexible, so the site supervisor has to step in to add other trades and such… lol.
Transferring money from that site to this site...
Pool the funds from that site... and use them to pay here... For the lease payments, use this from here...
I'm up to all kinds of stuff, lol (I can't really say much, but I think there's a lot going on... just my imagination).
However, our quotes as a construction company cannot be fixed.
We need to inspect the site to determine the appropriate price.
We need to find opportunities where the general contractor makes a profit and we also make a profit.
Occasionally, situations arise that are surprisingly unusual, but in those cases, you’ll need to consult with the general contractor.
Not every company is capable of performing cost estimates, but even so, a minimum level of cost management is necessary to determine the appropriate price for your company.
Contract Amount – All Expenses Incurred for the Project = Gross Profit
Even if you can't do cost estimates or create a budget, as long as you keep this one thing in mind, you'll be fine.
Please calculate the total cost of the construction project.
---For example, ○○○ Factory, 1,500 m²---
Staff: 5 people × 30,000 yen = 150,000 × 10 days = 1,500,000 yen
Transportation expenses: 5,000 yen per day × 10 days = 50,000 yen
Total: 1,550,000 yen
Company Expenses: 5% 1,550,000 yen × 1.05 = 1,627,500 yen
Target Profit: 10% 1,627,500 yen × 1.1 = 1,790,250 yen
Unit price: 1,970,250 yen ÷ 1,500 m² = 1,193.5 yen/m² = 1,200 yen
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*Excluding statutory benefits, etc.
It looks something like this.
We calculate this for each item, multiply the quantity by the unit price, and use that to determine the cost and profit.
Add those amounts together to get the estimate.
If the price is too low, you can go as high as the upper limit, and I think there will be some discussion about that.
If we can determine the appropriate price for each project in this way, both our company and the general contractor will make a profit.
I think the most important thing is the basic premise that everyone stands to profit.
Calculating money can be a hassle, but it’s an important part of life, so let’s make sure to learn it thoroughly!
See you later.
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