Cost Estimate - Profit
Cost Estimate - Profit
(OP)
I am currently working on an estimate to use in a rate negotiation with an owner/operator of a machine that has no Blue Book rates. Upon doing some research I have calculated the estimated ownership (fixed) and operating (variable) costs, and a general overhead value. The operating costs include an operator wage and a wage loading. I am stuck on how to add profit and risk to this estimate? Some estimates I've found apply profit and risk to the total ownership and operating cost portion (e.g. 10%-15% of ownership+ operating), while others have removed the wage component from the profit calculation and add it in at the end ((10%-15% of ownership + (operating-wages))+wages). Does anyone have any suggestions, keeping in mind I'm trying to get the lowest (logical) rate possible in order to start the negotiation (which I am sure will be higher by the end of it)?





RE: Cost Estimate - Profit
I would check with how your State's DOT handles equipment costs. Most states use Blue Book. DOTs' typically do a large volume of extra work, and often their prctices can be used as a standard when working with a private or municipal owner. Finally, I would check with local equipment dealers to see for what similar pieces of equipment rent. That way you can see if you are reasonable.
Most equipment carries a different rate for daily weekly or monthly rentals.