{"id":45293,"date":"2021-09-12T08:00:32","date_gmt":"2021-09-11T23:00:32","guid":{"rendered":"https:\/\/norimen.net\/wordpress\/?p=45293"},"modified":"2026-05-17T06:39:42","modified_gmt":"2026-05-16T21:39:42","slug":"fair-price-for-public-works-subcontractors","status":"publish","type":"post","link":"https:\/\/norimen.net\/en\/public-works-subcontractor-fair-price\/","title":{"rendered":"What exactly is a fair price for subcontractors in public works projects?"},"content":{"rendered":"

Hello, everyone.<\/p>\n

This is Enta.<\/p>\n

\"Fair<\/p>\n

Do any of you have a concept of a \"fair price\"?<\/p>\n

For example, what would be a good price for sheet metal installation, or how much per meter for drilling?<\/p>\n

 <\/p>\n

There are still times when even I get confused, lol.<\/p>\n

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.<\/p>\n

After calculating the total cost, I check the general contractor\u2019s winning bid price. Or I ask the general contractor what the winning bid rate was, lol.<\/p>\n

If the portion of the project awarded to our company is 1 million and the general contractor\u2019s bid success rate is 90%, the general contractor\u2019s contract amount will be 900,000.<\/p>\n

 <\/p>\n

If this amount is exceeded, the general contractor will end up operating at a loss.<\/p>\n

So this is the upper limit for a subcontractor, then.<\/p>\n

 <\/p>\n

Once you understand that, the next step is to create a budget.<\/p>\n

In my case, when the legal limit was 1,000 m\u00b2, all I had to do was enter \"1,000\" into an Excel cell, and the system would instantly calculate the materials and other details.<\/p>\n

So the results are generally similar, but we adjust the loss rate based on the shape of the site.<\/p>\n

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).<\/p>\n

 <\/p>\n

We will determine the quoted price based on this.<\/p>\n

 <\/p>\n

In the case of a second-tier subcontractor, we first calculate, based on the design price, a rough estimate of the first-tier subcontractor\u2019s (our prime contractor\u2019s) branch expenses, head office and branch expenses, and profit.<\/p>\n

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).<\/p>\n

On top of that comes the on-site profit margin. Roughly speaking, it\u2019s probably around 2\u20135%.<\/p>\n

You need to be careful here, since this is the top-tier secondary subcontractor.<\/p>\n

Prime Contractor's Bid Win Rate + First-Tier Subcontractor's Profit = Second-Tier Subcontractor's Contract Upper Limit<\/p>\n

Of course, the general contractor also needs to make a profit, so the price will be a little lower, but that\u2019s the general idea.<\/p>\n

\"Soaring<\/p>\n

When you think about it, the \"fair price\" would be the fair price for that particular situation, right?<\/p>\n

Conditions vary from site to site. The loss rate also varies.<\/p>\n

Despite that, there are still some general contractors who say things like, \u201cWe have a rule that we can\u2019t pay more than 400 yen per sheet of lath,\u201d lol.<\/p>\n

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.)<\/p>\n

The purchasing department makes decisions based solely on money without even looking at the actual site\u2014they\u2019re just like robots, lol. They\u2019re completely inflexible, so the site supervisor has to step in to add other trades and such\u2026 lol.<\/p>\n

 <\/p>\n

Transferring money from that site to this site...<\/p>\n

Pool the funds from that site... and use them to pay here... For the lease payments, use this from here...<\/p>\n

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).<\/p>\n

 <\/p>\n

However, our quotes as a construction company cannot be fixed.<\/p>\n

We need to inspect the site to determine the appropriate price.<\/p>\n

We need to find opportunities where the general contractor makes a profit and we also make a profit.<\/p>\n

Occasionally, situations arise that are surprisingly unusual, but in those cases, you\u2019ll need to consult with the general contractor.<\/p>\n

\"Money<\/p>\n

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.<\/p>\n

Contract Amount \u2013 All Expenses Incurred for the Project = Gross Profit<\/strong><\/span><\/p>\n

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.<\/p>\n

Please calculate the total cost of the construction project.<\/p>\n

 <\/p>\n

---For example, \u25cb\u25cb\u25cb Factory, 1,500 m\u00b2---<\/p>\n

Staff: 5 people \u00d7 30,000 yen = 150,000 \u00d7 10 days = 1,500,000 yen<\/p>\n

Transportation expenses: 5,000 yen per day \u00d7 10 days = 50,000 yen<\/p>\n

Total: 1,550,000 yen<\/p>\n

Company Expenses: 5% 1,550,000 yen \u00d7 1.05 = 1,627,500 yen<\/p>\n

Target Profit: 10% 1,627,500 yen \u00d7 1.1 = 1,790,250 yen<\/p>\n

Unit price: 1,970,250 yen \u00f7 1,500 m\u00b2 = 1,193.5 yen\/m\u00b2 = 1,200 yen<\/p>\n

\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d\uff0d<\/p>\n

*Excluding statutory benefits, etc.<\/p>\n

It looks something like this.<\/p>\n

We calculate this for each item, multiply the quantity by the unit price, and use that to determine the cost and profit.<\/p>\n

Add those amounts together to get the estimate.<\/p>\n

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.<\/p>\n

 <\/p>\n

If we can determine the appropriate price for each project in this way, both our company and the general contractor will make a profit.<\/p>\n

I think the most important thing is the basic premise that everyone stands to profit.<\/p>\n

Calculating money can be a hassle, but it\u2019s an important part of life, so let\u2019s make sure to learn it thoroughly!<\/p>\n

 <\/p>\n

See you later.<\/p>\n

Concrete Cover for Reinforcing Bars | Regulations on Cover Thickness for Formwork<\/a><\/p><\/blockquote>\n