10 Years Later and I Understand THIS About Contractors

TLDR
Ten years of hiring contractors taught me this: every bid is price plus three hidden surcharges. Fear tax, slop tax, FU tax. Anchor on man days plus material plus a reasonable markup and you can see all three when they show up.

Table of Contents

Price Has Three Parts Plus Three Taxes

Everything a contractor charges you should trace back to one formula: man days plus material plus a reasonable markup. That’s the honest version of the price. A guy costs $200 a day. He’ll burn $100 in material today. I want to make 20% on top of that, so the day costs $360 when I bid it out. If a job takes two guys five days, that’s ten man days, which is $3,600 to a customer.

Everything above $3,600 on a $3,600 job is a surcharge. That’s the anchor. Without it you can’t see what’s actually going on. The man day formula is not rocket science, it’s the discipline of asking “how many guys, how many days” every single time you get a bid.

The $3,600 number is the truth. Anything above it is a tax, and you should be able to name which one.

The Fear Tax

The fear tax is what happens when the contractor is scared of the work, or senses you are scared of it, and prices in the uncertainty. Sewer lines. EPA work like asbestos. Roof structures nobody wants to crawl. When the job has a scary reputation, the whole industry prices it high because they know the customer won’t push back.

There’s a second shape of fear tax that has nothing to do with you. It comes from the scene. If I walk a contractor through a house right after a tenant move-out and there’s rotten food in the fridge and fleas in the carpet, their brain stops seeing the $5,000 job and starts seeing the gross job. The number they quote reflects both. The fix is to clean the property up before the walk-through. I’ve had crews drop bids by a third just because the floors were swept and the junk was out.

Fear tax dies when you can explain the work. Know your scope of work, walk the property with the bid in your head, show the contractor what the real path is. If they still price in fear, hand the job to the next crew. You can’t get a bid to the man-day math while you’re still selling the work.

The Slop Tax

The slop tax is the tax you pay for somebody else’s bad business. Most contractors are great at the trade and terrible at running a business, and it’s a real thing. The solo operator who is smart and sharp and keeps track of his hours is the cheapest crew you’ll ever hire. The moment he brings on three guys, he’s a crew leader, and his efficiency drops. The moment he puts one of them in charge of another three guys, the numbers get ugly.

Nobody great at construction management comes out of college to do cheap flips in crappy neighborhoods. They’re building hotels or spec neighborhoods. So the shop ends up with a middle-manager who is worse at the job than the owner was, managing guys who don’t understand the vision either. You fund that inefficiency line-by-line through the bid.

The way out is the same way in. Anchor on the man-day math. If a bid is 30% over, it’s not because the work is hard. It’s because you picked a shop that has more meetings than billable hours.

Pro Tip
The best contractors to hire are the ones one step past “solo”. They have enough bandwidth to run your job and haven’t layered in the management tax yet. The sweet spot is small and stays small on purpose.

The FU Tax

The third one most people don’t know exists. A fu tax is the markup a contractor tacks on when they don’t want your business. The job is a real $3,600 job. They bid $7,200. If you accept, they’ll do it for the premium that buys off the annoyance. If you walk away, fine. They didn’t want the work to begin with.

I came up with this after talking to somebody in my community who kept getting weird bids. Too high across the board, from every crew he called. I told him the truth. They think you suck. Either you’re confusing them, or you’re trying to chisel them, or you’re making their lives harder than the job is worth. They’d rather not work for you, so they FU-tax you out of the deal.

This one is brutal because it’s about you, not the work. The fix is a mirror. Are you clear? Are you prompt? Are you reasonable? Do you pay on time without arguing? If the answers are yes, the FU tax usually disappears. If the answers are no, you have to fix yourself before the bids come down.

Speed Is About Bottlenecks, Not Hours

Speed is not whether a floor crew finishes in three days instead of five. Those two days don’t matter. What kills you is the three-week gap between the floors finishing and the next trade showing up, because the next trade got pulled onto somebody else’s job while yours was waiting.

contractors are not your employees. They’re managing their own business, and your job is one of several. What you’re really buying with your PM time is momentum. A good job site has four guys on it today, three tomorrow, none Thursday, five Friday. That’s fine. Bad job sites look like one guy on Monday, silence for two weeks, then a scramble because somebody finally realized it was still open.

The biggest bottleneck on your job is usually you. Countertop decision that took a week to finalize. Paint color you kept switching. Cabinet order that went in late. The crew can’t finish the work without the inputs, so they pull off to another job. The two weeks it takes you to unblock them become the three weeks it takes them to get back. That’s the math nobody warns you about.

Dumb Mistake
Assuming the contractor will restart at the same speed they stopped. They won’t. Every bottleneck creates a queue behind it. By the time you clear the blocker, you’re at the back of the line on their schedule.

The fix is to look ahead. Anticipate every admin-flavored decision, order, or call. Make them in the first week, not the week they’re due. The lazy pm posture is about eliminating the bottlenecks you cause, not supervising the work you hired out.

Quality Is Adherence to Scope, Not Craftsmanship

Quality is not high craftsmanship. I’m not building a jewelry box. I’m putting LVP floors in a rental-grade flip at the baseline of the neighborhood. Quality on that job means the floors run front to back, there are no transition strips in the doorways, the doors get undercut, and the scope of work is followed.

If you want actual craftsmanship, you’re hiring a specialty trade at a specialty price. That’s fine if the exit justifies it. For most of what I do, it doesn’t. Specifying craftsmanship on a baseline flip is asking for the whole bid to go up for no return in arv.

Universal rules matter. A drywaller who uses mesh tape on the ceiling-wall corner instead of paper tape is violating a universal rule. A crew that skips corner bead and just mud-feathers a corner is violating a universal rule. Those aren’t craftsmanship. They’re the floor of what the trade means when it calls itself the trade. Holding that floor is reasonable. Asking for an art piece is not.

Set the scope, set the expectation, hold accountability. If you said it and they agreed to it, they get paid when they do it. I’ll give a little on the margins. I don’t give on the spec. That’s the game.

Quality is a written scope of work that both sides signed. Anything not in the doc isn’t quality, it’s opinion.

FAQ

How do I know which tax I’m being charged?

Do the man-day math before you read the bid. If the number is 30% over, it’s probably slop. If it’s 50% over on a scary-sounding job, it’s fear. If it’s 80%+ over and the crew seems cold, it’s FU. Knowing which one is the first step to fixing it.

What is a “reasonable markup”?

Twenty to thirty percent over the labor plus material. It’s the working profit that lets the crew stay in business. Below 20% they’ll underperform because the job isn’t worth their time. Above 30% you’re funding something other than the work.

Should I just hire the cheapest bid?

No. The cheapest bid is often the contractor black hole bid. They bid low to win the job, then slow down or vanish once they hit a harder piece of the work. Hire the bid that maps cleanly to the man-day math, not the one with the smallest number.

How do I remove the FU tax?

Be somebody who’s easy to work for. Clear scope, fast decisions, on-time pay, no second-guessing the price after it’s signed. When you’re the customer people prioritize, the FU tax disappears because nobody’s trying to protect themselves from you anymore.

How do I handle a bottleneck I caused?

Own it fast. Call the contractor, tell them the blocker, and commit to a new start date. Don’t pretend the gap wasn’t your fault. They know. Acknowledging it keeps your spot on their schedule higher than the guy who’s blaming the crew for delays he caused.