7.5 Labor, Subcontractor & Access Costs and Preparing the Estimate

Building the Labor Estimate

1. Break the job into tasks: tear-off (per layer), deck repair, dry-in (ice barrier and underlayment), drip edge, shingles, valleys, flashing (walls, chimney, penetrations), ventilation, ridge, and cleanup.
2. Apply production rates from your own job history, such as squares per crew-day for tear-off and for installation, adjusted for slope, height, access, cut-up areas, and weather season. Steep and high roofs slow production and need more fall-protection setup.
3. Convert to hours and multiply by the crew's wage rates.
4. Add labor burden: employer Social Security and Medicare (7.65%), FUTA, Michigan unemployment tax, workers' compensation (a large cost for roofing classifications), and benefits.

Example: A reroof is estimated at 96 crew-hours. The average wage is $26 per hour, and labor burden is 30% of wages.

$\text{Labor} = 96 \times 26 \times 1.30 = 3{,}244.80$

Factors That Change Production

Adjust your production rates for conditions the walk-through revealed:

• Slope and height. Roofs steeper than about 8:12 need roof brackets or staging and slower, more careful movement. Two-story eaves add ladder and hoisting time.
• Layers and deck. Each extra layer adds tear-off time and disposal weight. Board decks with gaps may need overlay sheathing.
• Complexity. Valleys, dormers, skylights, and short runs between hips cut production far more than open planes do.
• Access. Long carries from the truck, landscaping that blocks the drop zone, or no boom-truck access all add labor.
• Season. Michigan's cold months slow self-adhered membrane and sealant work, and daylight is shorter. Summer heat needs more breaks.

Subcontractors

List each subcontracted scope as its own line, such as gutter replacement, chimney masonry repair, skylight replacement by a glazing contractor, or a PV removal and reinstall by a licensed electrician. Get written quotes. Confirm licenses where the work requires them, and collect insurance certificates, because an uninsured subcontractor's injured worker can become your workers' compensation claim (MCL 418.171).

Access, Equipment, and Other Direct Costs

Overhead and Profit

Overhead is the cost of running the business: office, vehicles, insurance, estimator time, licensing, advertising. Price each job to recover its share of overhead and a profit.

$\text{Selling price} = \frac{\text{Total direct cost}}{1 - \text{target gross margin}}$

Example: Direct costs are materials $7,800, labor $3,245, disposal and delivery $950, and permit $180, a total of $12,175. The company targets a 30% gross margin to cover 20% overhead and 10% net profit.

$\frac{12{,}175}{1 - 0.30} = \frac{12{,}175}{0.70} = 17{,}392.86$

Marking up the cost by 30% instead would give $15,827.50, only a 23.1% margin. That is enough for overhead but leaves just 3.1% profit.

Presenting the Estimate

A professional proposal lists:

• the exact scope: layers removed, deck inspection, ice barrier coverage past the wall line, underlayment type, drip edge, flashing replacement, ventilation, cleanup;
• specifications: shingle brand and line, ASTM wind and impact ratings, nail count and type, metal types and gauges;
• unit prices for concealed conditions, such as "$85 per 4-by-8 sheet of 7/16-inch OSB replaced, installed";
• allowances, if any, and exclusions such as interior repairs, chimney masonry, and gutters unless listed;
• the price, the payment schedule (a deposit, progress payments, and final, never the full job in advance), and the start and completion window;
• permits, insurance, and warranty statements.

When accepted, the proposal must become a written, signed agreement that clearly states the specifications, cost, type and amount of work, and type and quality of materials (R 338.1533). It must include your license information (MCL 339.2404a) and, for lien rights on a home, the statement that residential builders and M&A contractors must be licensed, with your license number (MCL 570.1114). For in-home sales, attach the Home Solicitation Sales Act notices (Section 3.4).

Checking the Estimate

Before sending the proposal:

• Compare the price per square to your recent similar jobs. Check the slope factor, waste, and layer count. Confirm the ice barrier courses for the overhang and slope.
• Confirm the crew size and schedule are realistic for the season.
• After the job, compare actual labor hours and material use with the estimate, and update your production rates. Job costing is how estimates improve.

One Business and Law Estimating Question

PSI assigns one Business and Law question to "estimating pertaining to residential building." Expect it to test the same skills as this chapter: quantities, unit conversions, and the difference between markup and margin.