Cost of the Work
Perception isn’t always reality
In today’s construction environment, selecting a contractor is about more than just comparing fees. Owners weigh a range of factors including schedule, relationships, reputation, and alignment with project goals to find the right partner. And in most cases, that partner should be viewed not as a vendor, but as a business ally someone with a shared stake in the project’s success.
But even in the strongest partnerships, the financial structure of a project can be more complex than it appears. That’s why independent oversight is a smart investment not because trust is lacking, but because clarity is essential.
One of the main determinants when it comes to competitive bidding is the contractor’s fee which is often viewed as their profit for managing all the moving pieces that come along with a complex construction project. Typically, a stated fee will range from 2–5% of the total contract value. At the same time, it’s worth considering that most contracts include non-reimbursable costs such as home office overhead, executive leadership, legal, accounting, and other business infrastructure. These are real and necessary expenses that support project delivery, but according to the contract, they can’t be reimbursed so we must assume they’re absorbed by the fee.
If we take that fee at face value and subtract those costs, it may appear that contractors are operating on very slim margins. And yet, the industry remains strong and competitive. That suggests there are other areas within the project where value is created and margin is recovered, often in ways that aren’t immediately obvious or apparent to the client.
Some of these areas include, but aren’t limited to:
Subcontractor costs
Labor and equipment rates
Change orders
General conditions
Procurement strategies
Insurance rates
Bid management
These are not signs of misalignment but simply part of how experienced contractors manage risk and run sustainable businesses. Remember, they’re often being graded on the fee % that is shown so they must work to account for these costs elsewhere. The market is encouraging these costs to be disguised or blended into the overall cost. This creates a situation for owners where costs can accumulate quietly as they’re not visible on the surface.
Once the contract is awarded, the competitive tension of the bid environment disappears. This is more relevant at the subcontractor level as there are no longer other vendors providing pricing for change order scope as there were during the bid phase. At this point, independent oversight becomes even more valuable as it provides the owner with a way to ensure they’re paying a fair and reasonable cost for the scope in question. It ensures that decisions made post-award are still grounded in fairness, accuracy, and alignment with the original intent of the contract.
In a market where capital is constrained and liquidity is tight, understanding what you’re actually buying becomes even more important.
It’s not about micromanaging. It’s about ensuring that the project is being delivered in a way that reflects the owner’s expectations—financially, operationally, and strategically.
Because when contractors and owners treat each other as true partners, transparency isn’t just helpful—it’s essential. And independent oversight is one of the most effective ways to support that partnership and protect the owner’s investment.