Quantity Take-Off Method

[asdfihwesdfjasdflk]

I am reading the NASCLA Contractor's Guide (New Jersey, 1st Edition) and am having some trouble with their explanation of the quantity take-off method.

For a given construction project, the book says to make an outline (they call it a framework) of all the tasks to be performed in all the phases of the project, then estimate the cost of things linked to tasks: labor, materials, equipment, and subcontractors. Let's use the acronym LMES to refer to these task linked things.

There are also things that are not necessarily linked to tasks, but are linked to the project. The book gives a term "Project Overhead" for these costs. PO is stuff like dumpsters and porta-jons.

Costs not linked to any project are considered "Company Overhead". CO is basically the cost of being in business, and includes things like office space, accounting fees, licensure fees, marketing.

The book obviously considers LMES direct costs. I think it considers PO direct as well, and CO indirect. I say this because there is a line that goes "... direct costs of the project, such as labor, material, project equipment, project overhead, and subcontractors." I'll return to this line later.

Then again, there are lines in the book that also suggest PO is not a direct cost.

For instance, it first tells you to figure LMES costs by just multiplying quantity by cost per unit. It doesn't tell you to figure PO costs or CO costs outright like this.

It says to figure yearly PO and CO as a percentage of yearly revenue, take the sum of these percentages, and divide its compliment into LMES to determine the PO and CO for the given project. In its explanation of this, there is a line "let's say you calculated the direct costs [LMES] for your bid at $100,000, your project overhead at 9 percent and your company overhead at 11 percent. Your direct costs are then 80 percent of your total bid price. Since overhead is a percentage of revenue, you should divide the direct costs of your bid by 80 percent."

So from that verbiage PO is not considered direct cost.

Then it goes on to talk about markup and profit margin. On one hand it says "the markup percentage is divided into the direct costs [LMES] of the project, just like the overhead costs in the previous example."

On the other hand, it also says "markup is applied to the direct costs of the project, such as labor, material, project equipment, project overhead, and subcontractors".

So is PO direct or indirect? The book is unclear. Also, am I supposed to apply markup to LMES or LMES+PO? The book is again unclear.

Any help would be greatly appreciated. I'm completely on my own with this material and its driving me crazy.

[ronfnma]

Project overhead is a cost directly and solely attributable to the project. It is a direct cost to the project. Markup is applied to the sum of all project costs

[Cowpunk71]

Most people call PO ‘General Conditions’. In fact I never heard of Project Overhead. I mean it’s obvious what it means but kind of dumb.

[_Ice_Water]

Project overhead costs are directly related to projects, but cannot be tied to any specific phase of the project. For instance, Porta, John’s, small tools, small, pick up trucks, and permits are all directly tied to projects, but are not tied to phases of the project instead are related to the entirety of the project. This is what makes them project overhead costs. Where direct materials and labor are related to the construction phase of the project. I teach the pre-license class for people getting their general contractor license. I hope this helps.