Construction projects can be a very complex endeavor and it is not uncommon for owners and general contractors to be involved in disputes. Even with the existence of a construction contract which dictates the costs, many of the disputes are over project costs. Many of our clients are requesting both pre-construction and near-completion cost audits. We have found these cost audits can be beneficial to both the owner and general contractor in avoiding misunderstandings and potential litigation.
 
Recently, an owner hired  BP to perform a pre-construction cost audit of a general contractor's bid proposal which contained a particularly large labor burden. The labor burden included safety, parking, auto and truck rental, drug testing, equipment insurance, certifications, sick and vacation hours, etc. Our analysis revealed that many of these costs were reimbursable, but not part of the labor burden and not to the degree estimated. For example, the vehicle insurance and parking was being charged to every employee while only a few employees have vehicles. Additionally, the sick and vacation hours significantly inflated the burden as well.
 
Result #2: The owner reaped the rewards of a pre-construction audit with a labor burden rate reduced by more than 50% and savings of over $135,000.  Establishing proper labor burden rates for change orders can also save thousands of dollars depending on the value of the change orders.