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PC Sum - Contractor's Profit versus Main Contractor Discount

  • 30-04-2014 1:40pm
    #1
    Bubbling
    Registered Users, Registered Users 2 Posts: 52 ✭✭


    We have received tenders for a small domestic building project - less than €200,000.

    A builder has priced the PC Sums "include 10% profit". We have no issue with the builder making a profit, but it has raised two queries:

    Q1. Is Main Contractor Discount the same as Contractor's Profit?

    Q2. Is 10% profit of PC Sums a high rate of profit for a builder? Is it not typically 5%?

    Thanks.


Comments

  • #2
    kkelliher
    Registered Users, Registered Users 2 Posts: 1,583 ✭✭✭kkelliher


    Bubbling wrote: »
    We have received tenders for a small domestic building project - less than €200,000.

    A builder has priced the PC Sums "include 10% profit". We have no issue with the builder making a profit, but it has raised two queries:

    Q1. Is Main Contractor Discount the same as Contractor's Profit?

    Q2. Is 10% profit of PC Sums a high rate of profit for a builder? Is it not typically 5%?

    Thanks.

    Main Contractors discount was a standard contractual entitlement of 5% (add 1/19) on a PC SUM to cover prompt payment to the specialist contractor. It was removed as a standard item in a contract redraft in 2012 and is no longer really in play. A contractor can add whatever he wishes to PC SUMS (which in alot of cases involve more work for him than other items as he will be working under the direction of the client/architect and will not generally be working with companies he has a relationship with). The standard add on is 5% with some contractors adding nothing on in tender situations in order to win the job.

    In respect to the rate of profit for a builder, if they were generally to make 5% profit there would be very little builders in business as this would be a ridiculous margin when you take account of the value of risk taken on by the contractors generally. The standard margin that most builders aimed for was 15% but at present it would generally be between 5 and 10% if at all. this depends on the size of their business, the type of projects and the type of clients that a builder would have.


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