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Will engaging a modular contractor cost me a lot more?
Following on from our previous article, let’s look at another perception of modular buildings.
Modular building contractors have much higher profit margins than main contractors.
In that case, surely using a modular solution will mean you pay more than necessary in overheads & profits?
Modular Building contractors do declare a far higher overhead and profit percentage than your typical main contractor. But let’s look at the reasons why.
Whereas a main contractor has office facilities, a modular contractor will also have a manufacturing facility in addition which needs to be paid for.
Arriving at a job cost for a production facility is very difficult. Building a cost for materials, labour & plant will help to generate a fairly accurate module cost. However, without real time information on how much the production facility and all the plant within it is costing, then building that into the module price is going to be near impossible.
This is why modular building contractors typically charge around double the overheads and profits of a main contractor. So, if your main contractor is charging 7.5%, a modular contractor might charge you 15%.
Can’t you just get a main contractor to deliver a modular solution?
As the client, if you want the whole package delivered then engaging a main contractor to deliver a modular solution certainly is an option. However, modular solutions reduce buying gains for main contractors because there are less packages. As a result, there is less opportunity to build a decent risk contingency and, crucially, limited scope to maximise profits from the project.
However, by engaging a modular contractor to deliver a turnkey solution, you may have to accept that you will pay an extra 5-10% on top of any costs that are not part of the modular unit.
What’s your alternative?
There is another option. The use of construction management to deliver the modular solution means there is no need to pay the mark up on the non-modular costs. The construction manager charges a fee for being the Principal Contractor and managing the site. Part of that role includes procuring the trade packages. As there is no mark up charged by the construction manager on the trade packages, the cost benefits are passed directly to you as the client.
Clearly, there is the potential to realise significant cost savings through the combination of modular construction and construction management.