Items in Estimating Overhead

What does Overhead Include?

In the BidMagic estimating software program, Overhead includes any cost that can't be assigned to a specific project. To calculate overhead costs for a particular time period, add up the cost of all the following items:

• Labor-- Include the cost of employee time spent on payroll, taxes and basic office paperwork, unless it can be assigned to a specific job. Also include time spent maintaining vehicles, equipment and the office or showroom, sales and marketing work, and any other labor that can't be assigned to a specific job. The payroll cost spent on overhead work should include burden--the cost of employer taxes and benefits.
• Owner's Time-- Include any time spent by the owner or owners on any task that can't be assigned to a particular job. Also include the cost of labor for any family members who are a part of the business, unless they were covered already under hired labor. NOTE: If the owners or family members are on salary, use the actual salary amounts (with burden) when figuring the cost of the owner's time. If not, use the larger of the following two costs--the theoretical wages that they should be getting while working on overhead items, or what they were actually paid.
• Materials-- Include the cost of office supplies, computers, tools, vehicles, and any other material items that can't be assigned to a specific project. NOTE: Also include sales tax and other similar taxes paid on office materials.
• Subcontractors-- Include the cost of subcontractors working on office, tool and vehicle repairs, plus time spent by your lawyer, accountant or other professionals on work that can't be assigned to a specific project.
• Miscellaneous-- Include advertising, office telephone, office utilities, general business licenses, taxes and fees, liability and other insurances (unless figured as part of payroll burden, page 146), and any other miscellaneous costs that can't be assigned to a specific project.

Overhead should not include any costs that can be assigned to a specific project--even if they are costs that might be considered as overhead in some other accounting systems.

EXAMPLES: Time spent with a client, on-site project supervision, building permits, jobsite telephone, jobsite utilities and jobsite cleanup can all be assigned to a specific project, so they should not be included in the overhead percentage. Instead, these costs will be handled by specific line item costs in Specifications.

Overhead should not include net profit. Any money paid to the owners over and above their basic salary for work performed should be entered into the Net Profit field instead of being included as a part of overhead.