CEMP-E/CECW-E
EI 01D010
1 September 1997
home office overhead are:
work, including the setup and removal of construction
facilities and equipment are part of overhead costs
(1) Main office building, furniture,
unless there is a specific bid item. For large projects,
equipment.
the cost for each part of this initial work should be
estimated on a labor, materials, and equipment basis.
(2) Management and office staff, salary and
For smaller projects, these costs may be estimated
expense.
based on experience.
(3) Utilities.
10-3. General Home Office Overhead
(4) General communications and travel.
(G&A)
(5) Supplies.
a. Home office overhead expenses are those
incurred by the contractor in the overall management
(6) Corporate vehicles.
of business, associated with all costs at the home
office. Since they are not incurred for any one
(7) General business insurance.
specific project, they must be apportioned to all the
projects. Many expenses such as interest and
(8) Taxes.
entertainment are not allowable. Construction
equipment depreciation is included in the EP 1110-1-
10-4. Duration of Overhead Items
8, Equipment Ownership Schedule cost rates and
should not be included in the G&A rate. An accurate
After the overhead items have been listed, a cost must
percentage of G&A can only be determined by an
be determined for each. Each item should be
audit. On major changes requiring an audit, it is
evaluated separately. Some items such as erection of
important to request that the G&A rate be
the project office may occur only once in the project.
determined.
The cost engineer should utilize the developed job
schedule in estimating duration requirements. Costs
b. Of all the categories of costs, the contractor's
reflective of each particular item during the scheduled
G&A costs are the least definable. Each contractor
period should then be applied. The product of
organizes its company differently from any other.
duration and unit cost is the overhead cost for the
Each incurs costs differently from varying sources
item.
and manages operations of that home office by itsown
methodology. It is important to understand that home
office costs are not standard and fixed. Even though
10-5. Sources for Pricing
the cost for a specific contractor varies from period to
period, a rate is normally averaged as a computation
The cost engineer must rely on judgment,
of total home office costs over a sufficient period
historical data, and current labor market conditions to
divided by the total volume of business during that
establish overhead costs. Sources for information can
specific period. This rate computation methodology
be obtained from current or past contractors bid data
allows distribution and projection to future project
and audits. Some contractors will informally discuss
estimates. When more specific data is not available,
and furnish information for overhead items and audit
the cost engineer may include empirical rates.
reports of previous similar projects. Other sources
Empirical G&A rates typically range from three
include previously negotiated modifications and
percent for large contractors to ten percent for small
review of organizational charts of construction firms
contractors. Home office costs are typically included
for staffing and overhead costs evaluation. Overhead
in the estimate of overhead as the product of an
salaries should include an allowance for payroll taxes
average experienced percentage rate times the
and fringes such as Federal Insurance Contributions
expected contract amount. Typical categories of
Act (FICA), health benefits, and vacation.
10-2
Previous Page
