Pricing and Cost Assembly

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Once you have quantities (from takeoff) and sub quotes (from bid leveling), you assemble the full cost estimate. This page covers the structure of a complete GMP estimate and what each component means.

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The GMP Cost Hierarchy

GMP Total
  ├── Cost of Work
  │     ├── Direct Costs (by CSI Division)
  │     │     ├── Self-Perform Work (GC's own labor + material)
  │     │     └── Subcontracted Work (leveled sub quotes)
  │     └── Direct Cost Subtotal
  ├── General Conditions (Indirect Project Costs)
  ├── Design Fees (if A/E is sub to DB firm)
  ├── Escalation Allowance
  ├── Contingency
  ├── Contractor Fee (Overhead + Profit)
  └── GMP Total

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Direct Costs

Self-Perform Work

Work the GC performs with its own crews (typically site work, concrete, general labor).

Unit Cost = (Labor $/hour × hours per unit) + (Material $/unit) + (Equipment $/unit)
Line Item Cost = Unit Cost × Quantity

Sources for unit rates:

• RSMeans Data Online (most widely used)
• Company’s historical production rates + current wage scales
• Sub quotes for comparison

Subcontracted Work

Use the leveled sub quote total from the bid leveling sheet — see Subcontractor Bidding and Bid Leveling.

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General Conditions

General conditions (gen cons) are the indirect project costs incurred to manage and support the work in the field.

Item	How to Estimate
Project Superintendent	Salary/rate × duration (months)
Project Manager (field time)	% of PM time × rate × duration
Field office trailer	Rental rate/month × duration
Temporary utilities (power, water, sewer)	Monthly usage estimate × duration
Temporary toilets	Quantity × rental rate/month × duration
Dumpster / debris removal	Frequency × haul cost
Site fence and security	LF × install cost + monthly maintenance
Safety program	Safety manager time + safety supplies allowance
Insurance (Builder’s Risk, GL, Workers’ Comp)	% of cost of work
Performance & Payment Bond	Bond rate × bonded contract amount
Building permit fees	Jurisdiction fee schedule × construction value
Surveying and layout	Lump sum or $/day × days
Testing and inspection	Concrete testing, soil compaction, weld inspection
Temporary HVAC (for winter interior work)	Equipment rental + fuel × months
Final cleaning	$/SF × area

Gen cons as % of direct cost: For a manufacturing plant addition, gen cons typically run 8–15% of direct cost, with longer, more complex projects at the higher end.

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Design Fees

In design-build, the A/E firm may be an in-house resource or a design sub. The design fee must be in the GMP.

Typical components: SD, DD, CDs, bidding assistance, construction administration, reimbursable expenses.

For a 35,000 SF manufacturing expansion, total design fees typically range from 5–10% of construction cost, depending on scope (structural-only vs. full AE services vs. process engineering included).

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Escalation

Escalation is the allowance for expected increase in material and labor costs between the estimate pricing date and when those costs will actually be incurred.

Escalation $ = Base Estimate × Escalation Rate % × (Years from pricing date to construction midpoint)

Apply separately to labor and materials:

• Labor escalation: 3–6%/year (tied to prevailing wage adjustments and union CBA expiration dates)
• Material escalation: 2–8%/year (variable; track ENR CCI and BLS PPI by commodity)

Sources: ENR CCI, BLS PPI (steel, copper, lumber), Mortenson Construction Cost Index

Scenario: 35,000 SF expansion, 18-month construction, pricing date Q1 2026, midpoint ~Q4 2026. ENR CCI trend ~4% annually → escalation ≈ base × 4% × 0.75 = ~3% of base estimate.

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Contingency

Contingency is a calculated reserve for identified risks and uncertainties — not a fudge factor. See Risk Contingency and Escalation for full methodology.

At GMP level (Class 2), typical contractor-held contingency: 6–12% of direct cost + gen cons.

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Contractor Fee (Overhead and Profit)

Fee covers home office overhead (corporate G&A, estimating, accounting, executive time) and profit. Applied as a percentage of Cost of Work + General Conditions + Design Fee:

• Design-build manufacturing: 3–8% fee, depending on project complexity, risk, and competition

Important: Fee is applied on top of contingency (contractor is not earning fee on contingency that may never be spent). Confirm with contracts team — some GMP contracts structure this differently.

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Schedule of Values (SOV)

Once the GMP is set, produce a Schedule of Values (SOV) — a breakdown of the GMP by CSI division or work phase that becomes the basis for monthly progress billings.

The SOV must:

• Mirror the estimate structure
• Include all cost components (direct cost, gen cons, design, contingency, fee)
• Be approved by the owner before the first pay application
• Sum to exactly the GMP amount

SOV Structure Best Practices

Align to the WBS, not just CSI divisions. If the project has distinct phases (demo, civil, steel, enclosure, MEP, process, commissioning), break the SOV by phase within each CSI division. This gives the owner meaningful progress visibility and reduces billing disputes.

Required line items:

Line Item	Guidance
Mobilization	Typically 2–5% of GMP; AIA A201 limits to cost actually incurred — do not front-load beyond actual mob costs
General conditions	Break out by month or milestone, not lump sum; owner can verify against field staff levels
Design fees	Tie to design phase deliverables (SD complete, DD complete, CDs issued)
Each major CSI division	One line per division minimum; subdivide large divisions (Div 26 electrical is often 15–25% of GMP)
Contingency	Single line; draw-downs reported separately in contingency log
Contractor fee	Single line; earned pro-rata against cost of work

Front-Loading: What’s Acceptable vs. What Gets Challenged

Front-loading means putting more SOV value in early line items to accelerate cash collection. Owners and their lenders scrutinize this:

• Acceptable: Higher mobilization value if actual mob costs are high (long-distance crew mobilization, significant temporary facility setup)
• Acceptable: Early payment for materials stored on site (see stored materials below)
• Not acceptable: Inflating early CSI divisions (say, site work) to collect more than earned
• Red flag for owner: If the sum of months 1–3 billings would exceed 30% of GMP but less than 20% of the work is actually done, expect pushback

Owner response to perceived front-loading: Negotiate SOV re-distribution before executing the first pay app. This is easier than fighting it at billing time.

Stored Materials Billing

Materials procured and on site (or in a bonded warehouse) can be billed before installation in most AIA contracts:

Requirements typically include:

• Materials stored on-site or in an approved off-site storage facility
• Bill of lading or delivery receipt provided with pay app
• Evidence of insurance covering stored materials
• Off-site storage: owner approval of the location and a lien waiver from the storage facility
• Materials clearly identified and segregated (tagged for this project)

Stored materials billing is valuable for long-lead equipment (power transformers, custom vessels) where the contractor pays a 30% deposit months before installation. Without stored materials provisions, the contractor funds this gap — add it to the contract if not already included.

Retainage Structure

Retainage is a percentage withheld from each pay application as security for project completion.

Structure	Description	Common Usage
Flat 10%	10% withheld on all billings through final completion	Simple; owner-favorable
Stepped retainage	Full 10% to 50% complete, then 5% thereafter	More common in larger contracts; AIA A102 default
Subcontractor retainage release	Release retainage to a sub when their scope is 100% complete and punch-listed	Protects sub cash flow; requires GC to flow through
Retainage substitution	Contractor substitutes a retainage bond for withheld cash	Used when retainage pool is very large (>$500K)

Practical note on retainage on contingency: Some contracts withhold retainage on contingency draws — confirm the contract language. Retainage on contingency that may never be drawn can create large paper liabilities.

SOV and Lien Waivers

Each pay app should be accompanied by:

• Contractor’s conditional lien waiver for the amount being billed (conditional on payment)
• Contractor’s unconditional lien waiver for the previously paid amount
• Subcontractor lien waivers (conditional and unconditional) for subs billed in the current app

Track lien waiver collection as a formal process — missing waivers can delay final payment and cloud title to the property.

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Quick Sanity Checks Before Submitting

1. $/SF Check: Divide total GMP by gross SF. Does the $/SF make sense for this facility type in this market?
2. Labor/Material Ratio Check: For typical industrial construction, labor is approximately 30–45% of direct construction cost. If your labor is 10% or 70%, something is wrong.
3. Scope Coverage Check: Walk through the project program line by line. Is there a number for everything the owner expects to receive? Any scope with no cost needs an explicit exclusion in the BOE.