Business, Estimating, Contracts, and Project Management
This domain tests whether you can price, contract, and administer HVAC work profitably and legally.
Estimating
- Build the estimate from a takeoff: equipment, materials, labor hours at the burdened rate, permit fees, disposal, and subcontractors.
- Labor burden covers payroll taxes, insurance, and benefits, commonly adding 25 to 40 percent to base wage.
- Overhead is the cost of staying in business; net profit is separate and must not be buried in overhead.
- Markup is added to cost; margin is a percentage of the selling price. They are not the same number.
Contracts and administration
- Use a written contract with scope, price, payment schedule, exclusions, and warranty terms.
- Every change gets a written change order signed before the work is done.
- Retainage of 5 to 10 percent is common; know the lien deadlines under the Louisiana Private Works Act for private jobs and the payment bond process for public work.
- Louisiana contractors pay sales tax on materials they consume; public projects may also require certified payroll.
Worked example
Materials are 4,200 dollars and labor is 32 hours at a burdened 68 dollars per hour, or 2,176 dollars. Direct cost is 6,376 dollars. Add 15 percent overhead: 6,376 x 1.15 = 7,332 dollars. To earn a 10 percent margin, divide by 0.90: 7,332 / 0.90 = 8,147 dollars. Note that a 10 percent markup would have produced only 8,065 dollars, which is not a 10 percent margin.
Traps that cost marks
- Confusing markup with margin and quietly losing profit.
- Leaving burden out of the labor rate.
- Omitting permits, crane rental, and disposal from the bid.
- Performing extra work on a verbal promise.
- Missing a lien or notice deadline and losing the right to collect.