How would your answer change in Exercise 3, if:

A. Market fees are at 7%.

B. This was a negotiated project.

C. The GC will perform $1.5 million in direct labor, and/or 

D. The GC has sufficient backlog and is submitting a complementary bid to a past client?

Data from exercise 3

What is the minimum fee, in both dollars and percentage of construction contract, a general contractor would need on an upcoming $10 million bid project? Assume the following parameters:

• $100 million expected yearly corporate volume.

• 3% home office overhead budget.

• Owner’s equity is $4 million.

• This project is estimated to have $1 million in direct craft labor.

• This project is expected to last 12 months.

• There is a full-time project manager and superintendent without a project engineer.

• Cost accounting is performed out of the home office.

• Construction company equity owners expect a 15% return on equity.