Business & Investing
Sponsored by

O&G MSA Question

1,120 Views | 7 Replies | Last: 3 yr ago by flown-the-coop
Sportsfreak
How long do you want to ignore this user?
So one of my customers states that I cannot markup my subcontractor work more than 15%. I haven't come across this with any other customer. Obviously, I can't make money at 15% margin, does anyone know of a way around this (if performing the work in-house is not an option)?
tlh3842
How long do you want to ignore this user?
AG
How much of the work is being subcontracted out? Depending on the volume of work with your customer, when my consultants are doing work a 5% markup on subs is typical.
Maverick06
How long do you want to ignore this user?
AG
Pretty standard in my business. I pay 10-20% markup depending on the contractor and what their MSA says.
Sportsfreak
How long do you want to ignore this user?
In this particular instance 100% of the actual labor is done by subs, the supervision is done in-house.

This is a new standard (in 2020) for this customer. The hard part is, we know even using subs, we are still the least expensive option for them. So putting this 15% markup mandate on us is going to be a back-breaker. This customer generates about 25% of our total annual revenue; so at a 15% margin, that's a killer.

That's where I am wondering if there is some way of working around it. For example, provide an invoice for 15% of the sub's work, along with an invoice for in-house work (obviously to which we don't have to provide a markup fee), and recoup some of my margins?

Hopefully, this makes sense...
nonameag99
How long do you want to ignore this user?
Do you not charge for your time managing the work in addition to the 15% mark up?

I am an electrical contractor for Midstream and downstream and a 15% cap on subs is typical for construction. We are honestly happy to get 15%. Some only pay 8%
The Aggie number specified has already been linked with another TexAgs account.
topher06
How long do you want to ignore this user?
Charge hours done internally separate from your markup on subcontractor invoices. That cap is on there cause some vendors love to milk work they're just outsourcing, and it's cream that should be easy to cut off from the vendors when everyone is bleeding. They'll probably let you put something in there explicitly stating you can bill your internal time - I handle my company's MSAs and id let something like that in.
mm98
How long do you want to ignore this user?
AG
Have your sub increase their price by 5%. Work out a back end rebate after the job is done.

But yes general yes contracts normally have a cap on how much one can make on direct source.
07&09Ag
How long do you want to ignore this user?
I'm struggling to understand how you can't make money with a 15% markup on subs. If all the work is performed by them and you are billing your supervision at appropriate rates I'd think 15% would be more than sufficient.
flown-the-coop
How long do you want to ignore this user?
AG
15% OH&P is pretty standard, if not a bit rich. You may have too much OH sitting at your level, push it down.
Refresh
Page 1 of 1
 
×
subscribe Verify your student status
See Subscription Benefits
Trial only available to users who have never subscribed or participated in a previous trial.