Business Management, Estimating, and Project Administration
Estimating structure
A bid is built from material takeoff, labor units, equipment, subcontractors, permits, and general conditions, then burdened with overhead and profit. Markup on cost and margin on price are different numbers, and that difference is the classic exam trap. Administrative items include written contracts, change orders in writing before work proceeds, schedules, submittals, and warranty documentation. In Arizona, contractors are the prime contractor for transaction privilege tax purposes on their gross receipts, so tax treatment belongs in the estimate, not in the profit line.
Payment and lien rights
Subcontractors and suppliers who do not contract directly with the owner generally must serve a preliminary twenty-day notice to preserve lien rights, and a lien must be recorded within the statutory period after completion. Understand progress billing, retainage, and the importance of written change orders to avoid disputes over unpaid extras.
Job costing and control
Estimate, then compare actual labor and material to the estimate by phase. Variances signal estimating errors, productivity problems, or scope creep. Document site conditions, delays, and verbal direction in writing, because documentation decides most disputes.
Worked example
A job costs $10,000 in labor, material, and subs. Adding 25 percent markup gives $12,500, which is a 20 percent margin. To achieve a true 25 percent margin, divide cost by one minus the margin: $10,000 / 0.75 = $13,333. Confusing markup with margin quietly erodes profit on every job.
Traps
Do not quote prices before the load calculation and site visit, do not allow work to proceed on a verbal change order, and do not let the license or insurance lapse mid-project.