What should I ask about how a general contractor estimates and tracks job costs?

Start with a handful of completed projects of different sizes. For each one, ask for the estimate, the actual cost by category, the change orders and the final margin. Look for patterns. Do the same trades or materials run over each time? Are small jobs more profitable than big ones? Estimates that match results consistently suggest a sound process, and ones that miss in the same direction suggest a habit.

Next, ask how the tracking works during the job. Who enters the costs, how often, and who reviews them? Is anyone watching committed costs, not only paid ones? Ask how change orders are priced, approved and billed, and how quickly. Delays in billing changes are a common way for margin to leak away.

Then ask about overhead. Fixed costs such as rent, insurance, vehicles and office staff have to be covered by the jobs, so find out how they are built into the pricing. Check how this compares with the financial statements. If the estimates ignore overhead, the profit on paper may be misleading. Your accountant can help you read job costing next to the books, and a trusted tradesperson can tell you whether the unit costs look reasonable for the work.

Key takeaways

• Compare estimates with actual costs on several completed jobs.
• Ask who tracks costs during a job and who approves change orders.
• Find out how overhead is built into every bid.
• Check job reports against the financial statements.