How to Price a Commercial Construction Job in the USA
Commercial construction pricing in the USA operates by different rules than residential. Estimating is more rigorous, payment is slower, and the margin structure is different. Here’s how to price commercial work correctly.
Commercial Construction Estimating Methods
Unit price estimating: Price per measurable unit (per SF of framing, per LF of pipe, per opening). Fast for repetitive work. Standard in large commercial projects.
Assembly-based estimating: Group related items into assemblies (wall assembly = framing + sheathing + insulation + drywall + finish). More accurate than unit pricing for complex work.
Detailed cost estimating: Line-item material and labor for every scope element. Most accurate; most time-consuming. Required for fixed-price commercial bids.
Overhead and Profit in Commercial Construction
Standard commercial markup structure:
| Component | Typical % of direct costs |
|---|---|
| General conditions (site supervision, temp facilities, insurance) | 10-20% |
| Overhead (office, admin, estimating, marketing) | 8-15% |
| Profit | 5-12% |
Total markup: typically 25-45% above direct labor and material costs for a well-run commercial contractor.
Bid Bonds and Performance Bonds
Most commercial owners require:
– Bid bond (5-10% of bid amount): Guarantees you’ll enter the contract if you win
– Performance bond (100% of contract): Guarantees project completion
– Payment bond (100% of contract): Guarantees payment to subcontractors and suppliers
Bonds are issued by surety companies and require established credit and business history. New commercial contractors often can’t obtain bonds – another reason to subcontract commercially first.
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FAQs
What margin should a US commercial general contractor make?
Net profit of 3-8% is typical for commercial GCs. Gross margin (before overhead) is higher – typically 15-25%. The thin net margins are why cash flow management is critical in commercial construction.
What is an AIA G702 and why does it matter?
The AIA G702 Application for Payment is the standard payment application form in US commercial construction. Clients and GCs expect it. Learn to use it – it documents your completed work, stored materials, and retainage clearly.
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Related reading:
- How to Write a Quote That Wins the Job as a US Contractor
- How to Follow Up a Quote Without Being Pushy (USA Contractors)
- How to Ask for a Deposit Without Losing the Job (USA Contractors)
- How to Write Terms and Conditions for a US Contractor Quote
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