Contractor markup on equipment rental?

[jpcjguy]

Hi all,

What is the normal markup for a contractor on equipment rental? I had a contractor build a retaining wall and he rented a skid steer and excavator for a month to assist in the work. He gave me a number for the cost of the rental and I called the rental place after they picked up the machines to confirm that everything was good and just happened to ask what the charge was for the machines for the month and turns out it was much less than the number he gave me. In fact, he tripled the number?!?
Asking what is standard - I assume some, but triple??

Thanks

 

[zkdiesel]

Usually double
Was transport included?
Fuel defiantly not included!
Any repairs non warranty done? Aka wrecking a tire on rebar……

 

[gmcgeo]

Like ZK said its often double.

In my area most will take 1.65 and times it with the number.

1.65x$400 = $660.

Some are now moving up to 1.75.

 

[jpcjguy]

no damage - machines delivered and picked up by rental company. I did all the fueling - during the job and topped them off before pickup.
So he had no charges otherwise....

 

[jpcjguy]

I was told 6k and it ended up at 1924.74

 

[gmcgeo]

I was told 6k and it ended up at 1924.74

Contractor told you it would be 6k for the rental? or the entire job including rental

 

[strength_and_power]

We usually add 30-40% so triple seems a bit excessive. There are pick up and delivery fees on top of the day/week/monthly rate so maybe it wasn’t quite triple. He also could have been burying some of his labor rate so his quote looked better. Was his total price in line with other quotes?

 

[bdbecker]

Did the contractor complete the job for the agreed upon price? If yes, then don't waste any more time thinking about it. You got what you wanted for the money you were willing to pay.

 

[jpcjguy]

sorry everyone! the number from the rental place was waaay off - I probably should have questioned it - how on earth could a large skid steer and excavator be 2k for a month rental including pickup and delivery?!?! I took the number at face value (to be fair I am a homeowner and never rent stuff like that). Called back and talked to someone else and got the 6k number. Also then went on the rental site and a competitor and added equivalent machines and they were priced around 6k.
So sorry for my knee-jerk post - but I also learned more about markup on equipment and what to expect.

 

[billspit]

I remember when we marked stuff up 13%.

 

[larry_g]

There are also tax implications from what is charged. I believe that rentals are an expense deducted from the job. So if someone is paying attention to what bucket the money is in then the taxes can be saved.

lg

 

[jack stand]

Hi all,

What is the normal markup for a contractor on equipment rental? I had a contractor build a retaining wall and he rented a skid steer and excavator for a month to assist in the work. He gave me a number for the cost of the rental and I called the rental place after they picked up the machines to confirm that everything was good and just happened to ask what the charge was for the machines for the month and turns out it was much less than the number he gave me. In fact, he tripled the number?!?
Asking what is standard - I assume some, but triple??

Thanks

I think he threw the daily or weekly rate at you. Generally if you rent for 3 days or weeks, you can get a week/month.
Of course that's a 8 hour day or 40hr week especially on equipment with an hour meter.

 

[nadogail]

IMHO, It sounds like there has been some "Creative Accounting" used to justify different numbers in the ledger for this project.

 

[mike93lx]

I remember when we marked stuff up 13%.

Glad the OP got it sorted. I wouldn't have been surprised at 2x. Although this thread is a great example why quotes shouldn't be itemized. Homeowners pick them apart

 

[PCustoms]

Although this thread is a great example why quotes shouldn't be itemized. Homeowners pick them apart

Alright, I'll start this argument...

Why shouldn't they be picked apart? A 2x markup to call up and have a piece of equipment dropped off is asinine. It took almost no effort, didn't tie up an employee and the costs incurred are rolled up into the rental.

Reminds me of the thread a few weeks back where a garage quote was itemized, including borderline insane amounts of $$ for fuel

 

[bdbecker]

...Why shouldn't they be picked apart? A 2x markup to call up and have a piece of equipment dropped off is asinine. It took almost no effort, didn't tie up an employee and the costs incurred are rolled up into the rental...

As long as both parties agree to a price ahead of time and the work is completed to the customer's satisfaction, it is inconsequential to the customer how the contractor comes up with a price, or how much they profit off a job. If the customer doesn't like the price, they can try to negotiate it down, or simply choose not to work with that contractor.

I deal with outside contractors on a near-daily basis for my job. Every expense is scrutinized up the chain, so I have to look for the most cost effective ways to get a project completed. That being said, the only time I really care about itemized lists is when I get bids that vary wildly in overall cost. This is usually a good indicator that either a breakdown in communication occurred regarding the scope of the project, or someone is overcharging for their work. Occasionally (but rarely), it's because I'm getting a good deal.

Even if I were to start asking for line item cost summaries for each project, the contractors would just find ways to hide the costs in other areas if I started picking through each line the list. If I were to call them out on something like the rental fee on a piece of equipment only costing $4k instead of the $6k they quoted, the next time they bid a job for me, they'll just hide that $2k difference in the labor bucket.

 

[CraigStu]

I agree w/ the OPs original concern. 'You got what you wanted at the $ you agreed to' doesn't fly if some of the line items that make up the total price are outrageous. Most customers of contractors don't have knowledge or experience in building. That is why they hire a contractor in the first place. Otherwise they could have been their own contractor. But a customer's lack of experience in a trade doesn't give the trades person the right to screw over a customer. I am glad that the OP's pricing turned out to be justified. But what if the original question had turned out to be valid? Is he expected to do just eat the extra $4K simply because it was within 'the $ he agreed to'?

 

[bdbecker]

I agree w/ the OPs original concern. 'You got what you wanted at the $ you agreed to' doesn't fly if some of the line items that make up the total price are outrageous...

What about that "doesn't fly"? You are under no obligation to work with that contractor. If you get competing bids and they all come in at a similar price point, that is the cost of the project for your area, inflated or not. That is how a market economy works.

 

[NC Fabricator25]

I agree w/ the OPs original concern. 'You got what you wanted at the $ you agreed to' doesn't fly if some of the line items that make up the total price are outrageous. Most customers of contractors don't have knowledge or experience in building. That is why they hire a contractor in the first place. Otherwise they could have been their own contractor. But a customer's lack of experience in a trade doesn't give the trades person the right to screw over a customer. I am glad that the OP's pricing turned out to be justified. But what if the original question had turned out to be valid? Is he expected to do just eat the extra $4K simply because it was within 'the $ he agreed to'?

What do you mean “is he expected to just eat the extra $4k?” If he agreed to an overall price for the work up front, and that work is performed (which it sounds like it was) then yes, of course he is. Picking it apart after the fact wouldn’t change the outcome, from a contractual perspective.

 

[jpcjguy]

I think everyone has valid points but you have to look at the overall situation. My original question was about markup on rental equipment - and it ended up being a mistake on my part by not confirming the number is "market price". That is on me. Now the conversation expanded to "acceptable markup" - which must be taken in context of the situation.
If I had a fixed price contract to which I agreed to and it was a 3x markup - that would be fine because I agreed to the CONTRACT. How the costs are broken down is/should be irrelevant. (that does not mean I don't have responsibility in doing homework on the breakdown of the costs to a reasonable point)
On the other hand, if there was not a formal contract and I was paying hourly and was told by the contractor the equipment rental was 6k (and I agreed to it) AND it was agreed (at the start) that I would cover all material and extra costs (equipment, gas, etc.) - THEN to find out he tripled the equipment cost - that would be in bad faith. (or should have been disclosed up front)
The latter was my case. Yes it was a handshake deal (and that responsibility is on me) but I have 2 close friends that had a lot of work done by him and they vouched for him. Am I pleased with his work? Absolutely. Did he bust his **** in 100 degree heat building a retaining wall? Absolutely. If he added a couple hundred to the equipment bill, I would have been fine. (I see that similar to an auto mechanic marking up parts some to offset expenses). While not a trades person myself, I see how hard they work and give the benefit of the doubt. I do most of my own automotive work and see how an hour job can turn into 5 with a broken bolt ($&@#&@!!!). Life doesn't always go according to plan and I recognize that reasonable additional costs are necessary offset those times you have to eat it.
I really did not want this thread to turn into "that argument" - and I can see both perspectives....

 

[mike93lx]

Alright, I'll start this argument...

Why shouldn't they be picked apart? A 2x markup to call up and have a piece of equipment dropped off is asinine. It took almost no effort, didn't tie up an employee and the costs incurred are rolled up into the rental.

Reminds me of the thread a few weeks back where a garage quote was itemized, including borderline insane amounts of $$ for fuel

Markup doesn't matter. The job does. If the job is too expensive, hire someone else

If you care that much about individual lines, do it yourself and eliminate the markup

I dont see either of us changing each other's minds on this, though

 

[PCustoms]

Markup doesn't matter. The job does. If the job is too expensive, hire someone else

I agree with that, but how do people avoid getting gouged?

Say I don't have any skills, and I call a few contractors to have a job done. I'm smart, so I do my diligence and get 3 quotes:

$50k
$60k
$70k

These are pretty close to each other, they seem inline and nothing is alarming. There's a big swing from cheapest to most expensive, so I think I'll settle for the $60k and he's got a few good references so the quality should be good.

Job comes out good, so I'm happy, right?

The opposite situation is I know that the job is $5k in labor, $10k in materials and $10k in equipment/overhead. $25k total cost.

Boy, I feel like I got screwed paying a couple guys with a skid steer for a few weeks of work. That contractor pulled in $15k+ profit in a week. Assuming he works 26wks and figuring for job size, he's making $250k a year.

Now things seem a bit out of line, dot they? I need to find the post where the guy had an itemized garage quote, which included something like $6k fuel allowance. Diesel is $4.5/gallon right now (last I looked), that's 1300 gallons of fuel! What the hell is he running to burn that much fuel for a garage build?

Just because the (ignorant) market will bare it doesn't mean the current prices and mark-ups are correct.

Maybe I'm wrong and I should just drop everything and get back into contracting full time. A 1/4 mile working just the summer sounds pretty good right now...

 

[mike93lx]

I agree with that, but how do people avoid getting gouged?

Say I don't have any skills, and I call a few contractors to have a job done. I'm smart, so I do my diligence and get 3 quotes:

$50k
$60k
$70k

These are pretty close to each other, they seem inline and nothing is alarming. There's a big swing from cheapest to most expensive, so I think I'll settle for the $60k and he's got a few good references so the quality should be good.

Job comes out good, so I'm happy, right?

The opposite situation is I know that the job is $5k in labor, $10k in materials and $10k in equipment/overhead. $25k total cost.

Boy, I feel like I got screwed paying a couple guys with a skid steer for a few weeks of work. That contractor pulled in $15k+ profit in a week. Assuming he works 26wks and figuring for job size, he's making $250k a year.

Now things seem a bit out of line, dot they? I need to find the post where the guy had an itemized garage quote, which included something like $6k fuel allowance. Diesel is $4.5/gallon right now (last I looked), that's 1300 gallons of fuel! What the hell is he running to burn that much fuel for a garage build?

Just because the (ignorant) market will bare it doesn't mean the current prices and mark-ups are correct.

Maybe I'm wrong and I should just drop everything and get back into contracting full time. A 1/4 mile working just the summer sounds pretty good right now...

If you are happy with the work and can afford it, I wouldn't call it getting gouged.

No idea how knowing line item markup changes any of that

How do you know the cheapest guy wouldn't have screwed you?


Life is full of taking chances.

 

[PCustoms]

How do you know the cheapest guy wouldn't have screwed you?
.

That's partly my point.

If my only frame of reference is the 3 quotes, and I don't understand the costs of materials/labor etc, how can I judge the value of the finished product?

You're right though, if I don't care about $60k, and I'm happy with the job does it matter?

There are crews around here that charge 2-3x for work on the north side of town. Same exact output, but they know the homeowners will pay it without batting an eye.

 

[PCustoms]

Here's the post and thread I was talking about. I was wrong, the fuel allowance was $3500

Okay, newbie here. I realize prices have soared since Covid, and I should brace for sticker shock. I received an estimate for a garage (mainly to be used as a woodshop) I will detail below, nothing super special here. It is a 40x24, plans are attached here. Thoughts and advice would help. I have a friend who will install a larger air-to-air heating colling unit, so add on another $8k to the below price. Here is what the contractor outlined:

• Install insulated monolithic slab • Trench utilities • Backfill with stone and rough grade around site - $48,600
• Frame 2x6 wall system using CDX plywood and self adhered WRB. • Frame roof using scissor trusses -- 4/12 interior pitch 8/12 exterior pitch • Install vented roof assembly. • All header sizes TBD (assumes LVL) - $51,391
• Garage doors: TBD • Install windows & doors. • Allowance for entry door: $4,000 • Allowance for double doors: $6,000 • Flash all windows and doors. • Garage door install by others. -
• Install Coravent Sturdi Battens 16" OC for rainscreen. - $14,405
• SIDING: TBD SPEC - ALLOWANCE ONLY • Install siding and trim per plan. • Install metal flashing details around foundation base, windows, doors, and garage doors - $23,400
• Install standing seam metal roof per plan. $21,840
• Allowance for electrical service, rough-in, and finish • TBD ELECTRICAL DESIGN : $18,300
• Install smart vapor control membrane on all walls and roofs with taped seams. • Install wood fiber batts in walls and loose fill wood fiber in trusses. - $15,457
• Install 5/8" Sheetrock on walls and ceilings with fire taped finish. - $12,000
• Provide dumpster • Two week telehandler rental • Fuel allowance- $3540
TOTAL: $213,223

Estimate for new garage, advice needed

Okay, newbie here. I realize prices have soared since Covid, and I should brace for sticker shock. I received an estimate for a garage (mainly to be used as a woodshop) I will detail below, nothing super special here. It is a 40x24, plans are attached here. Thoughts and advice would help. I have...

www.garagejournal.com

 

[mike93lx]

That's partly my point.

If my only frame of reference is the 3 quotes, and I don't understand the costs of materials/labor etc, how can I judge the value of the finished product?

You're right though, if I don't care about $60k, and I'm happy with the job does it matter?

There are crews around here that charge 2-3x for work on the north side of town. Same exact output, but they know the homeowners will pay it without batting an eye.

Its not about not caring about 60k.

Its about feeling like you made the right decision about spending an extra 10k over the low bid.

If you care about the math enough to need the breakdown, you should be diying or at least gc'ing all aspects, not seeking a bid for the job

I have no problem telling a contractor that I would like their price to be lower, nor confirming details of the job, but would never ask someone to itemize their work unless I wanted a cost-plus bid

 

[PCustoms]

Its about feeling like you made the right decision about spending an extra 10k over the low bid.

We're not on the same page and I'm not going to sway your opinion tonight so let's leave it as we agree here:

If you care about the math enough to need the breakdown, you should be diying or at least gc'ing all aspects, not seeking a bid for the job

 

[mike93lx]

We're not on the same page and I'm not going to sway your opinion tonight

We agree on both of those, too

 

[duneslider]

Say I want to buy a car, a good car. I go looking and first place shows me a car for $45,000 and says it is great and a top seller in the country. Second place shows me one that is $100,000 and says its the best on the market. Third place shows me one that is $250,000 and says there is nothing else like it on the road. Which one is best, they are all good cars? If I ask for a detailed breakdown is that going to help? If I stated up front I was looking for a budget 4 door sedan with good gas mileage, good reliability, and not flashy its pretty clear which one is the right one.

When I give bids it can go a few ways. IF the customer brings me a detailed scope of work I will give them a price for their detailed scope of work and if the other contractors had that same detailed scope of work the quotes are apples to apples. If someone comes to me with an "idea" and wants a price I am going to price it the way I do it and the only guarantee I will give is that I won't be the cheapest bid you get. We will even do open book pricing, similar I guess to a cost plus situation, we state upfront what our rates are and what our profit will be on top and we will show you the books where every hour is accounted for, every receipt is shown, and a line at the bottom showing what our profit is. What I won't do is give you a break down of every line item because that is a ton of work and likely will change later on and then the customer complains about the change, or I have to eat it cause they won't pay the difference.

If you want a line item quote you are gonna pay me for it and there will also be a contingency line. If I am giving you a quote and assuming all the risk you better believe I am going to make it work out in MY best interest and not yours but I am going to make sure you get the job you are paying for because my reputation rides on that. Why shouldn't a contractor make $250k?

Also, typically, when bids are written with allowances, that isn't a set number. I do that fairly often too, with things that are unknown, which happens to be excavation and concrete quite often. I will put in a $30,000 allowance. If the work ends up at $20,000, that's what I charge. If issues show up partway through and I can see $30,000 isn't going to be enough, I have a conversation with the customer and let them decide how to move forward.

I'm not sure why people get bent over what business owners make. There is a lot of risk in owning a business, if a business is taking advantage of poeple and screwing them the market tends to correct that situation real quick.

It sounds like your handshake contract was a little wishy-washy and that is really where the problem is but still it sounds like you got what you paid for and at the end of the day what does it matter what the contractor's mark up is? It's really irrelevant to the situation.

 

[Codyboy]

sorry everyone! the number from the rental place was waaay off - I probably should have questioned it - how on earth could a large skid steer and excavator be 2k for a month rental including pickup and delivery?!?! I took the number at face value (to be fair I am a homeowner and never rent stuff like that). Called back and talked to someone else and got the 6k number. Also then went on the rental site and a competitor and added equivalent machines and they were priced around 6k.
So sorry for my knee-jerk post - but I also learned more about markup on equipment and what to expect.

Advertised pricing on their website is not real truthful. It is but there are additional fees, delivery/pick up and taxes the website doesn't reflect most times. Probably never.
I rented a scissor lift and saw it was , idk. 495 for a week.
Well by the time all the additional was added it was close to double the advertised website price. But they were still cheaper than other places.
As someone else mentioned, don't scrutinize on what a contractor has to rent.
He gives you a price to do such and such thing.
Thats the price.

And never refuel someone else's rental. No way would I do that unless I used it personally while the cat was away.

 

[jpcjguy]

I already apologized for taking the original price given to me by the rental place at face value ( guy was wrong). Contractor was 100% on the up and up. That is on me. My intent was not to start a contractor homeowner/DIY war but I do appreciate learning more about how contractors price and markup on things like rentals, etc. to help cover unexpected costs. I totally get that there are customers that are unreasonable and don’t Care about the risks that a contractor takes. Those are customers that just want the job done and give me a price in the beginning. They are the type that need serious padding for those unexpected issues because they are probably unreasonable as potential snags are hit.
Then there are those customers who can appreciate the risks are willing to work with a contractor adjust accordingly as things arise, etc. those are also the customers that are potentially being their own GC on the job, but then they have skin in the game, do their homework and ideally are reasonable.
I think it was a great point that a contractor has to make a profit while assuming risk and must factor in the reputational risk also. All valid Points.
Goes back to every situation can be different and how the contract/work is approached in the agreement between the customer and the contractor. Both sides need to be reasonable.

As for my handshake contract being wishy-washy, possibly, but I assumed that risk. I know that paying by the hour could either be a win or a loss for me. It was my judgment call to assume that the excavation for the wall would go without any snags like buried concrete or massive stumps.
Now for the next phase of the project, which is a large stamped concrete patio with footer and drainage. I will definitely have a formal contract with everything spelled out. Big difference than a retaining wall made of block that can be moved, adjusted in height, etc.

 

[mike93lx]

Now for the next phase of the project, which is a large stamped concrete patio with footer and drainage. I will definitely have a formal contract with everything spelled out.

Don't be surprised if this requirement results in lots of ghosting from contractors.

 

[jpcjguy]

Oh and for fueling someone else’s rental - now thinking about it - I can see that. Technically those rentals are on my contractor but he assumed the risk of me fueling them properly and using the machines when he was not there.
Comes back to the situation. He probably felt more comfortable seeing that I have a complete garage with 10k lift, multiple welders, 6 quads, one ton axles waiting to be installed, etc. that I would treat the machines accordingly and fuel them properly.
But I get the comment.

 

[jpcjguy]

Don't be surprised if this requirement results in lots of ghosting from contractors.

Ok maybe my “everything spelled out” was a bit dramatic, but more than a handshake…

 

[jimindm]

It is threads like this, that are giving all trades people bad name.

With the exception of very few, most do not wake up today and think who am I going to overcharge, scam or screw today. They have a job to do and they do it. A shop doesn't care if its a corolla or a corvette. A roofer doesn't care if it is a shed or a mansion.

Most are giving you the price that it takes to do the job. Part of what you pay for is experience, and that you can not put a price on that. A hand shake deal is just as good as anything else, if you are dealing with people that know the processes.

This thread started by one that agreed to a price, then started shopping after. I didn't go back and read the whole thing , but I don't think one time he complained about the quality of the work. If I recall he got the contractor from friends referrals. If you can not trust them, who can you trust.

The one difference in this tread is the OP came back to say that he was wrong and the contractor did do right. That is one in a million situation.

I have said it more than once as a trade person I am not sure I would ever do any kind of business, with most p[people on the board.

I guess I must be fortunate to have a long list of customers that want what they want, and are willing to pay my price. With the understanding that they are my customer and that I am going to be fair with them. If things go well of if things go sideways. They just want a price, they don't need three estimates, line item invoicing, and the list goes on.. They trust me with installing quality parts, and any warranty after the sale. They don't care if I am BBB rated, ase certified, and all of that. I am just jim that fixes their vehicles, at a fair price.

 

[jpcjguy]

To clarify - I was not "shopping after" - I personally like to do my own accounting on project costs for reference on future work. (and I don't think there is anything wrong with "trust but verify") Helps me understand what I might not have taken into account as I look at projects. I appreciate everyone's time and effort.
The more knowledgeable I am on project costs (including any markups) I hope to NOT waste contractors time by having them out and giving me a quote for a project that I cannot afford.

Let's say I have $20k budget for a project and it turns out to be $40k (from contractors quote), that would probably kill the project - then I might have just wasted the contractors time. Whereas if I am more informed on project costs, I can manage my expectations better and ensure that when I do meet with contractors, it is not a waste. (like don't go into a Porsche dealer with a $20k budget - wasting the salesperson's time - but in this case the contractor spent time and money coming to me)

Jim - appreciate you recognizing that I came back to say I was wrong (which I will always freely admit! )

 

[NUTTSGT]

I was told 6k and it ended up at 1924.74

Either you got a better deal or made a typo.

 

[PCustoms]

Either you got a better deal or made a typo.

Keep reading...

 

[NUTTSGT]

Keep reading...

Makes sense, I started that post and had to go help the neighbor get his JD out of the ditch. . . never got to read more.