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How to Charge for Excavation Work

May 3, 2023 | Blog, Job Bidding

As a contractor in the construction industry, it’s important to price your services competitively while also ensuring that you are being fairly compensated for your time and resources. Excavation work is a vital component of many construction projects, but determining how much to charge for this service can be tricky. In this article, we’ll discuss some of the factors to consider when pricing excavation work, as well as typical payment terms for this type of service.

Factors to Consider when Pricing Excavation Work

  • Project Scope and Complexity
    The first factor to consider when pricing excavation work is the scope and complexity of the project. The more extensive and complex the project is, the more time, equipment, and labor will be required. Excavating for a small home foundation, for example, will likely be less expensive than excavating for a large commercial building or a multi-acre site. You need to know the dimensions and grade of the land to be excavated. It’s important to carefully assess the scope of the project before providing a quote to ensure that you are pricing your services appropriately.
  • Type of Soil and Terrain
    The type of soil and terrain on the job site can also impact the cost of excavation work. Soft soil or loose sand, for example, may require additional support or reinforcement to prevent cave-ins, while rocky or uneven terrain may require specialized equipment or techniques to excavate. It’s important to evaluate the soil and terrain conditions on the job site to determine if any additional precautions or equipment will be required to complete the excavation safely and efficiently.
  • Equipment and Labor Costs
    Excavation work requires specialized equipment, such as backhoes, bulldozers, and excavators, which can be expensive to purchase or rent. Additionally, skilled operators are required to operate this equipment safely and efficiently. It’s important to factor in the cost of equipment and labor when determining how much to charge for excavation work. You must know how much it costs to run your equipment per hour, how much fuel you will need, and your hourly operator costs.
  • Project Timeline
    The timeline for the project can also impact the cost of excavation work. If the project has a tight deadline, you may need to bring in additional equipment or workers to complete the job on time, which can increase the overall cost. It’s important to communicate any timeline constraints with the client and factor this into your pricing.

Typical Payment Terms for Excavation Work

  • Lump Sum
    A lump sum payment is a one-time payment that covers the entire cost of the excavation work. This payment is typically made after the project is completed and may be broken down into multiple payments based on project milestones. This payment structure is often preferred by clients as it provides a clear understanding of the total cost of the project upfront.
  • Time and Materials
    Under a time and materials payment structure, the client pays for the excavation work based on the amount of time spent on the job and the cost of materials used. This payment structure may be more appropriate for projects with uncertain or variable scopes. However, this payment structure may be less desirable for clients as it can result in unexpected costs if the project takes longer than expected.
  • Cost Plus
    A cost plus payment structure is similar to time and materials, but also includes a percentage markup to cover overhead and profit. This payment structure may be preferred by contractors as it ensures that all costs are covered and provides a guaranteed profit margin. However, this payment structure may be less desirable for clients as it can result in higher overall costs.
  • Retainer
    A retainer payment structure involves the client paying a portion of the total cost upfront to secure the contractor’s services. The remaining balance is then paid in installments as the project progresses. This payment structure may be beneficial for contractors as it provides a guaranteed revenue stream, but may be less desirable for clients as they are required to pay a significant portion of the cost upfront.

To summarize, pricing excavation work requires careful consideration of the project scope and complexity, type of soil and terrain, equipment and labor costs, and project timeline. By taking these factors into account, contractors can ensure that they are pricing their services appropriately while also being competitive in the market.

When it comes to payment terms for excavation work, there are several options available, including lump sum, time and materials, cost plus, and retainer. Each payment structure has its advantages and disadvantages, and it’s important to communicate with the client to determine which payment structure is the best fit for their needs.

It’s also important to remember that pricing and payment terms for excavation work can vary depending on the region, market, and other factors. It’s essential to stay informed about industry trends and pricing in your local market to ensure that you are offering competitive pricing while also being fairly compensated for your work. You must keep your material costs up-to-date (FYI, the ProfitDig system automatically notifies you periodically if you have not updated your materials costs)!

In addition to pricing and payment terms, it’s important to communicate clearly with clients about the scope of the project, the timeline, and any potential challenges that may arise during the excavation process. By being transparent and proactive in your communication, you can build trust with your clients and ensure that the project runs smoothly from start to finish.

If you still need some help with the concept of how to charge for excavation work, get in touch with us! It is our goal to help young contractors be as successful as possible. We also suggest you use ProfitDig. It greatly speeds up the process of creating job bids by allowing you to create your bids from a set of preconfigured bid items and even cloning job bids an unlimited number of times. Try it out today!