HOW CONSTRUCTION SUBCONTRACTORS UNDERBID WITHOUT KNOWING IT, FOUR HIDDEN PATTERNS.
A subcontractor who keeps closing jobs below bid margin isn't always losing the money in the field. A lot of it's lost in the estimate, and the loss repeats because the bid template never got updated. The overhead rate comes from memory. The labor burden multiplier is years old. The production rate came from the best job instead of the average one. Mobilization sits inside a contingency line that gets eaten before month two. Each error is invisible at bid time, and each one turns up at closeout as the distance between what was estimated and what was earned.
None of these four errors feel like errors while you're building the bid. The numbers in the template were right when somebody set them, and nobody sets a reminder to check them again. Then two PMs get hired, the truck count doubles, workers comp renews higher, and the template keeps quoting a business you no longer run. The estimator is doing careful work with bad inputs. That's why raising the price doesn't fix it by itself: you would be stacking margin on top of costs you still can't see, and you would lose bids you should be winning.
WHAT IT MEANS.
Systematic underbidding is a bid that misses margin the same way on every job, because the estimate template still carries a stale overhead rate, an old labor burden multiplier, best-case production rates, and no separate line for mobilization.
WHY THE BID LOOKED RIGHT AND THE JOB STILL LOST MONEY.
The overhead rate in most bids is whatever it was last year
Most subcontractors bid with an overhead rate they have been using for years. It was roughly right when it was calculated, possibly 3 to 5 years ago when the business was smaller. Since then two PMs were hired, a new yard was leased, the company truck fleet doubled, and health insurance premiums increased 40 percent. The rate was never updated, so every bid submitted in the last three years has been underbidding overhead by the distance between the old rate and the real one. On a $600,000 project at a 6-point overhead understatement, that's $36,000 in overhead that was never recovered.
Labor burden calculated on base wage, not total compensation
Workers comp rates change at renewal, health insurance premiums increase annually, and retirement contributions were added two years ago. The labor burden multiplier in the estimate template was set at 1.32 when workers comp was lower, and the real multiplier today is 1.41. On 2,400 estimated labor hours at a $38 base wage, that 0.09 difference is $8,208 of underestimated burden on a single project. A contractor bidding 15 to 20 projects a year at similar labor intensity is leaving $80,000 to $120,000 a year on the table from stale labor burden alone.
Production rates taken from best-case history
Estimators remember the jobs that went well. The crew that produced 90 CY/hour in the best conditions becomes the mental benchmark for every production rate assumption after that. The realistic average across all conditions, difficult access, crew variation, weather impact, and inspection holds, is 72 CY/hour. Every estimate built on the best-case rate underbids labor by the distance between peak performance and average performance, and the fix is a production rate database built from completed jobs instead of from memory.
Mobilization and indirect labor estimated at zero or buried in contingency
A 5 percent contingency that's supposed to cover mobilization, indirect labor, general conditions, and surprises isn't really 5 percent. It's 5 percent being asked to do 15 percent of the work. When the contingency gets consumed by mobilization and general conditions in month one, there's nothing left for the surprises, and surprises aren't optional in construction. Mobilization, indirect labor, and general conditions each need their own line item, estimated against a standard checklist, with contingency held back for what nobody could see coming.
WHAT IT LOOKS LIKE IN DOLLARS.
Pull estimated against actual gross margin on the last 5 completed projects. If actual is consistently 4 to 8 points below estimated, systematic underbidding is present, and that difference is the starting point for the diagnosis. Then recalculate the overhead rate from current costs and compare it to the rate used in recent bids, because the difference times recent revenue is the annual dollar impact.
A contractor who finds and corrects a 6-point overhead understatement, a 4-point labor burden error, and $15,000 in unrecovered mobilization per project recovers $44,000 on a $600,000 project. Across 15 projects a year, that's $660,000 a year of recovered margin from estimate accuracy alone, with no change to revenue, crew, or contracts.
THE DIAGNOSTIC THAT FINDS WHERE THE MONEY WENT.
The rate is calculated from the costs the business carries today rather than carried forward from memory, then compared against the rate sitting in the bid model. The difference times recent revenue is the annual dollar impact, so the size of the correction is a number instead of an argument. The bid template is updated before the next bid goes out, not at year end.
The real burden rate is actual payroll cost divided by actual base wages, taken from the last payroll and not from the template. That number gets set beside the multiplier the estimator has been using. When the two disagree, the template is corrected, and every bid after that carries the burden the business really pays.
We go back through the last 5 completed projects and check whether mobilization and indirect labor were in the estimate as their own line items or absorbed into contingency, then work out what each one cost. That comparison shows which categories are priced short on every job. Those categories become their own lines in the template, with contingency left for surprises.
Actual units per hour by work type get recorded as jobs close, which builds the rate history the estimate should be based on. Peak performance stops being the default assumption because the average is written down. The estimate improves every quarter the tracking runs.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
Pricing
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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