Contractor quoting cost plus model along with overhead fee?

[Jon Martin]

HI Everyone, 

Been trying to nail down some quotes for a rehab on a 2/1 SFH. Had 2 contractors who committed to starting the job flake (good riddance, better now than later), so at the time of writing I only have 1 contractor willing to start with a quote in hand. Supposed to get 2 more in the next few days. Scope of work includes drywall and interior paint on ~900 SF, 5 doors, baseboards, knocking down a kitchen wall, kitchen rehab (counter, cabinet, backsplash), and a handful of small misc stuff.

Problem I'm having is the 1 quote in hand from the first 3 is asking for a cost plus of 30% on his subs along with an extra $5K fee for "overhead" (office, truck, gas, etc). Is this normal? The cost plus % already seems high on its own . . . .  but either way shouldn't the contractor's actual overhead cost be wrapped into the cost plus markup fee? 

Thank you all in advance! 

[Bruce Woodruff]

You're correct that a Contractor's Overhead and Profit are usually wrapped up in the markup, whether it's a Cost Plus bid or a standard Fixed Price bid. But he can add a little slush on if he wants to, it's your choice whether or not to accept the bid.

And although 30% sounds high, it is typical to add a markup of 25%. This will give you your 20% profit (or margin). Even most younger Contractors don't do it this way and just add 20% to everything, thinking that will give them their desired 20% profit.....and they wonder why they can't make enough money to keep going....