Monday’s Superstorm Sandy Seminar for Public Insurance Adjusters had some very interesting discussions involving the fine details of adjustment. One of those had to do with the costs of supervision and whether those should be part of general contractor overhead and profit.

The insurance industry, through its estimating program Xactimate agrees that job related direct supervision is not included in General Contractor overhead and profit. It should be a line item cost:

General Overhead are expenses incurred by a General Contractor, that cannot be attributed to individual projects, and include any and all expenses necessary for the General Contractor to operate their business.

Examples (including but not limited to): General and Administrative (G&A) expenses, office rent, utilities, office supplies, salaries for office personnel, depreciation on office equipment, licenses, and advertising.

Including General Overhead expenses in an Xactimate estimate—General Overhead expenses are not included in Xactware’s unit pricing, but are typically added to the estimate as a percentage of the total bid along with the appropriate profit margin. These two costs together constitute what is normally referred to in the insurance restoration industry as General Contractor’s O&P, or just O&P. General Overhead and Profit percentages can be added in the Estimate Parameters window within an Xactimate estimate.

Job-Related Overhead are expenses that can be attributed to a project, but cannot be attributed to a specific task and include any and all necessary expenses to complete the project other than direct materials and labor.

Examples (including but not limited to): Project managers, onsite portable offices and restroom facilities, temporary power and fencing, security if needed, etc.

Including Job-Related Overhead expenses in an Xactimate estimate—Job Related Overhead expenses should be added as separate line items to the Xactimate estimate. This is done within the Line Item Entry window of an Xactimate estimate by selecting the proper price list items, or creating your own miscellaneous items.1

Keep this in mind next time when making estimates of building construction costs.

1 ©2009 Xactware Solutions, Inc.