The direct cost describes the resources necessary to execute the line items. To prepare an offer you must also analyze the administration of the project, the cost of money and the proposed profit. KOSAN brings together these components in its Overhead, financing and profit module., with an integration that allows you to review the bases of each percentage.
Understanding that structure helps explain the selling price and detect omitted or duplicate amounts before submitting the budget.
What each component represents
The direct cost considers resources linked to the execution of the line items. The overhead collect general expenses that you need to distribute on site, such as field administration and office support, depending on the scope of the analysis.
Financing represents the cost of providing resources while payments arrive. The profit is the charge that is incorporated into the basis chosen to integrate the price. Each component responds to a different decision and should be analyzed separately.
As a reference for federal public works, the RLOPSRM describes the overhead and its bases, as well as the cost of financing and the profit. The applicable call and contract determine the conditions that you must comply with. RLOPSRM Articles 211, 212, 214, and 219.
Why the calculation base matters
Suppose a direct cost of $1,000,000, overhead 12%, a financing coefficient of 2% and profit of 10%. They are hypothetical values before VAT; The 2% is a coefficient adopted to show integration, not an annual bank rate. We exclude additional charges.
| Example step | Operation | Amount |
|---|---|---|
| Direct cost | Initial base | $1,000,000 |
| Overhead | $1,000,000 × 12% | $120,000 |
| Financing base | $1,000,000 + $120,000 | $1,120,000 |
| Financing | $1,120,000 × 2% | $22,400 |
| Profit base | $1,120,000 + $22,400 | $1,142,400 |
| Profit | $1,142,400 × 10% | $114,240 |
| Example integrated pricing | $1,142,400 + $114,240 | $1,256,640 |
In this cascade each percentage uses the indicated base. If you added 12% + 2% + 10% and applied everything to direct cost, you would get $1,240,000. The difference would be $16,640, although the percentages written were the same.
That is why a percentage must be accompanied by its base. A comparison between budgets needs to verify both.
Markup on cost and margin on sales
In the example, the profit of $114,240 is equivalent to 10% of the basis of $1,142,400. Regarding the selling price of $1,256,640 represents approximately 9.09%.
This helps to interpret an offer: percentage of profit applied on a basis and margin to sale are different relationships. Furthermore, the budgeted charge does not automatically equal the final profit; This depends on the actual costs and conditions of execution.
How to check overhead in KOSAN
KOSAN allows you to work with percentages and with a detailed analysis of field and office overhead. In the latter, the recorded expenses allow us to calculate their proportion compared to the direct cost of the project.
You can use that analysis to prepare an explanation of administrative resources: what staff you need, for how long, and what support costs are involved in implementation. The system presents the amount of each component and the integrated price.
When you save the configuration, the catalog and reports use the established percentages. It is advisable to review the complete result after a major modification of the direct cost or the deadline.
How to analyze financing
The KOSAN integration screen calculates an approximate factor with annual rate, term and advance payment. Its structure is: rate × term in days ÷ 365 × proportion not covered by advance payment ÷ 2.
For example, an assumed rate of 12% per year, term of 180 days, and advance payment of 30% produce an approximate coefficient of 2.0712%. It is an illustrative calculation of that tool, different from the 2% adopted in the previous table.
To study the dates of purchases, payments, estimates and collections in greater detail, KOSAN also has Construction Simulation. The general integration and flow projection allow the budget to be reviewed from two levels of analysis. In a tender, check the requested method for funding before using a result in the proposal.
A sequence to prepare the price
- Check quantities, unit price analyses and prices of direct cost.
- Defines field and office expenses, taking care of their scope and duration.
- Check what insurance, bonds or other line items the integration contains.
- Capture financing conditions and review your assumptions.
- Defines the profit and verifies its application base.
- Please review additional charges, taxes and specific requirements separately.
- Save the configuration and check the catalog, totals and reports.
Avoid charging the same expense in a unit price analysis and again in a general percentage without justifying the distribution. A consistent report allows the budget to be explained and facilitates future reviews.
Frequently asked questions
Is there a universal percentage of overhead?
The percentage depends on the expenses, the direct cost, the duration and conditions of the project. Detailed analysis helps support the chosen figure.
Does the advance payment eliminate the financial cost?
Its effect depends on how much it covers and when it is received. Review scenario payments and collections to identify resource needs during execution.
Does the proposed profit guarantee the final profit?
It is a component of the offered price. The final result requires reviewing real costs, changes and collection conditions.
With KOSAN you can integrate and review the selling price from its components, and relate it to a detailed analysis of overhead and the planned execution of the project.
To locate the integration within the full proposal, see how to make a construction budget step by step.