NORWOOD, OHIO —I recently came across an article H. Kent Craig wrote on job schedule and schedule of values that has helped me quite a bit. I was wondering if I could ask a couple of questions. I am the second generation in a commercial glazing business that my parents started in 1988. My brother and I are now taking over and because of our backgrounds, the current opportunities in our area and such we have about quadrupled in size over the last four years. This quick growth has found us dealing with a lot of things we never had before, one of those is schedule of values. This first came about for us as phasing breakdowns of areas, floors, etc., on schools and hospitals we were doing, so we broke out our material and labor (grumbling all the way) and moved along.
Being further down the road at this point we see our mistake, I think the GCs were laughing with glee at our lack of experience because not only did we not front load our SOV, we didn't really have anything beyond material and labor. Obviously this has affected our cash flow and once I started doing more research I realized why.
So after that short history this is what I am wondering. What exactly do you consider mobilization? I know that our industries are rather different, but I am sure you could shed some light on this any way. Also, do you ever put in a value for administrative expenses? Do you get away with it and what type of percentage would you use for this? Any help or information you could o˛er would be greatly appreciated, thank you so much for your time and I hope to hear from you!
Keegan Erickson
Interstate Commercial Glass & Door, Inc.
Kent Craig responds: The first thing to remember about Schedule Of Values is that they are driven 100% by two things: 1) the actual contract price you bought the job for, and 2) the job calendar schedule (the exact start and stop dates for the job). There are other factors that influence the SOV but these two are what drive your payment benchmarks.
There is no hard and set formula for coming up with a "mobilization fee." Most subcontractors typically plug in 2%-3%, but since there is no real way to quantify mobilization, it's basically whatever the GC/CM/architect will let you get away with. I would say never ask for more than 5% of total contract price for mobilization, but don't be shy about pushing the envelope since the worst they can say is "no."
No, I never put in any broken-out fee for administrative expenses. Doing so is not industry standard practice and trying to do so would mark you immediately as someone who is either new to the business or just doesn't know what they're doing.
When setting up benchmark payment milestones you need to obviously include labor and materials, but this is where you round-up those numbers to include your SG&A expenses for that portion of the job. I don't mean to talk down to you, but as long as all your SOV payments add up to 100% of the contract sum, it doesn't matter how you shag the percentages for each scheduled payment. Obviously you want to frontload as much as possible, within reason.
Don't forget about the standard industry practice of going ahead and buying most of the major equipment for the job and storing that material on the job and then getting release of liens for the material so you can take not just the ˛oat for the materials but also a reasonable pro˚t for those materials. Of course, doing so will require you to have a storage trailer for the job and insurance for the materials, but the upside is that you'll get a huge slug of cashflow from doing so. I hope this helps and best of luck in your future endeavors.