The Ultimate Guide To PG Cost In Construction
I’ve spoken to a lot of builders over the years from all over the country about pg costs in construction, and they frequently complain that they “don’t appear to be able to, or rarely manage to reach, the man hours I allow and price for each job.”
Many people believe that the correct pricing strategy is to estimate the total cost of supplies for a task using a merchant’s “take off” and multiplying that figure by the estimated total number of labor hours. This is incorrect!
First, the merchant may not pick up all the supplies needed for the materials or determine the exact number. You will then incur a cost as a result.
Measuring all necessary materials, adding an acceptable wastage factor for each material, allowing for cartage, if necessary, and making allowances for fixes is the proper and most precise method (nails, glue, screws).
Applying a man hour constant to each quantity of material and multiplying that result by the charge out rate you want to receive for your labor is the most precise technique to calculate labor costs.
For instance: 500 meters of 100 x 50 framing at 0.19 man hours per metre, multiplied by 95 hours at, say, a $40 charge out rate, comes to $3800 + GST.
Depending on your pricing structure and the needed dollar return for the task after all overhead and costs are recovered, margin (profit) is either added to the material and subcontract totals only or might be added to the total labor cost.
I hear some of you asking, “What has been forgotten?” Many people are unsure what preliminary and general signify.
Some example PG costs:
When and if necessary, fees associated with the Territorial Authority for consent examining the rights of the owners of neighboring properties,
Renting out other people’s land (from councils) is necessary to complete the task laying out the structure
Putting together and updating a program,
Insurances such as Public Liability and Contract Works, setting up a site shed and hiring one
Continuing rental expenses, temporary phone, water, and electricity costs
The cost of site fence for safety and health
Signage, first aid, labelling of electrical equipment, leads, and other health and safety provisions
Scaffolding for the stairwell, whether outside, inside, or special.
Edge protection for roofs
Porta-potties and recurring expenses, such as cleaning and supplies
Various plant hire
Frame and trusses being hoisted or craned to the first floor level
Concrete pumping or craneage
Moving supplies from the delivery vehicle to the appropriate location on the job site upkeep of temporary roads, various cartage
Expenses for labor, waste container rental, and cleaning
Final cleaning of the premises and location
Supervision, the foreman’s downtime, etc
Overtime, travel expenses, and car charges
Allowances for meals, lost time from inclement weather or other downtime
Participation of subcontractors
Site meetings, upkeep expenses during the time of accountability for defects
Creating the Master Build Guarantee, Handover handbook, As Built drawings, Progress photos, and Site Disestablishment.
how to charge for offsite & onsite overhead PG Costs
Everyone is aware that a house is constructed with bricks, sticks, and labor, all in equal parts. There are other considerations that must be made in the selling of that home, though.
Everything has a price attached to it. The phone you are using, the shirt you are wearing, the ute you are sitting in while you are in the shirt making the call, are all factors every time you answer a client call. I could go on all day about how you originally received the call. So how are all of these intangibles covered?
In essence, PG Costs can be divided into two groups
both onsite and off-site overheads (commonly referred to as Preliminary & General, or P&G). You must comprehend the definition of each phrase in order to determine what belongs in each category.
On-site overheads are expenses that are incurred because of the work for which you are being paid.
Offsite overheads are expenses related specifically to managing your firm.
Here are some items that would be classified as on-site overheads to better clarify:
Cartage
Safety and Health
Hire access equipment
Signage
Site management
Site prepared
Administration of jobs
Testing of asbestos
Site safety
Portaloo
Plant and tool rental
The list goes on, and the NZS4202 has an entire section at the start of it if you want to view a more comprehensive list.
Moving on to off-site overheads, keep in mind that these are connected to managing your firm;
Marketing
Yard rental
Entertainment
Office management
Accounting
Legal costs
Work uniforms
Printing and stationery
IT and computers
Power/Internet/Phone
From where I stand, I can pretty well hear you asking, “What about items that sit in both camps?” A good query. A few items could be included in the list of both onsite and offsite overheads.
Quantity surveying is one of our favorites.
There are two components to this. There is the price of initial pricing, which applies to everyone, including you. Everything is paid for! There are costs associated with winning initial pricing jobs as well as costs associated with losing initial pricing deals. Both MUST be taken into account in your work.
For a number of reasons, I prefer to manage adding in for QSing in this way. I’m confident that you are aware of roughly how many tasks you win and lose each year. You may calculate your conversion rate right there. If you estimate 10 jobs annually on average and charge a QS fee of, say, $3k per work, your yearly investment in job pricing will be $30k. The amount of the “costing budget” you would ascribe to jobs is $6k, and the remaining $24k must be included in your offsite overheads budget, if you know you convert, say, 20% of the jobs you win.
How does that appear, then? My recommendation is to include your QS costs in the Onsite Overheads trade for every work you price. Then, if they agree, you get your money back. Itemized costs make up onsite overheads. The remaining $24k is included in your margin calculations along with the rest of your offsite expenses. This margin, which is calculated by your accountant as a percentage of your total turnover, is applied to EVERY job, whether it is won or lost. Offsite Overheads% plus Profit% is the definition of MARGIN.
is QS being done on-site or off-site?
From where I stand, I can pretty well hear you asking, “What about items that sit in both camps?” A good query. A few items could be included in the list of both onsite and offsite overheads.
Oddly enough, quantity surveying is one of our favorites.
There are two components to this. There is the price of initial pricing, which applies to everyone, including you. Everything is paid for! There are costs associated with winning initial pricing jobs as well as costs associated with losing initial pricing deals. Both MUST be taken into account in your work.
For a number of reasons, I prefer to manage adding in for QSing in this way. I’m confident that you are aware of roughly how many tasks you win and lose each year. You may calculate your conversion rate right there. If you estimate 10 jobs annually on average and charge a QS fee of, say, $3k per work, your yearly investment in job pricing will be $30k. The amount of the “costing budget” you would ascribe to jobs is $6k, and the remaining $24k must be included in your offsite overheads budget, if you know you convert, say, 20% of the jobs you win.
How does that appear, then? My recommendation is to include your QS costs in the Onsite Overheads trade for every work you price. Then, if they agree, you get your money back. Itemized costs make up onsite overheads. The remaining $24k is included in your margin calculations along with the rest of your offsite expenses. This margin, which is calculated by your accountant as a percentage of your total turnover, is applied to EVERY job, whether it is won or lost. Offsite Overheads % plus Profit % is the definition of MARGIN.
Frequently Asked Questions About PG Costs
What is p and g in construction? P and G stands for Preliminary and General in construction and generally refers to on and offsite overheads of a construction project.
What are preliminaries and general items in construction NZ? In New Zealand, non-construction activities and indirect expenditures related to a building project are referred to as preliminary and general items. They might consist of things like: Project management and planning establishing and preparing the site Site fencing and security Onsite amenities (e.g. toilets, offices) Temporary services (e.g. electricity, water) Insurance Planning for health and safety Management of the environment Geotechnical research and surveys Permissions and court costs These expenses may be listed separately in construction contracts and are frequently included in the overall budget for a project.
What is PG cost? Preliminary General Cost, or PG Cost, is the abbreviation for all indirect costs related to a construction project, including project planning, site preparation, insurance, and legal charges.
Why are PG prices significant? In order to guarantee that a construction project is completed on schedule and within budget, PG costs must be taken into account as they have a substantial impact on the project’s overall budget.
How is the cost of PG determined in New Zealand? The size, complexity, and location of the project, as well as the services required, are all variables that might affect the amount of money spent on PG expenses, which are typically expressed as a percentage of the overall construction budget.
Who is in charge of covering the PG expenses? Generally speaking, the construction contract specifies who is responsible for paying for PG expenses and might be either the owner or the contractor.
What happens if PG expenses go above budget? If PG expenditures go above budget, it could have an effect on the construction project’s overall budget and need adjustments like lowering the scope of work or finding cost savings in other places. To prevent budget overruns, it is crucial to manage and keep an eye on PG expenses throughout the construction phase.