- On March 13, 2018
The purpose of this white paper is to provide clarification regarding Retail Labor Rates that are built-in to most, if not all, removal items within Xactimate.
Click here to download this white paper as a PDF.
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Removal items (-) commonly default to Demolition Labor (DMO), while replacement items (+) commonly default to their corresponding trade. For trades utilizing the same crews for removal and replacement, or trades requiring specialty tradesmen – and not general demolition laborers – this removal Retail Labor Rate should be corrected to the proper trade.
For instance, the below image shows the line item ‘Tear off, haul and dispose of wood shakes/shingles’ (RFGSRMV). The Retail Labor Rate defaults to Demolition Labor, or ‘DMO’.
Recognizing that roofing trades may warrant this Retail Labor Rate be changed to the actual trade – in this case, Roofing (RFG) – a user may adjust this by using the drop down, then by selecting
As a second example, the line item ‘Packaged air conditioning unit – 2 ton 13 SEER’ (HVCPAC2) has been listed below. The Retail Labor Rate also defaults to Demolition Labor (DMO).
Recognizing that HVAC trades may warrant this Retail Labor Rate be changed to the actual trade – in this case, HVAC (HVC) – a user may adjust this using the drop down, then by selecting ‘HVC’
(HVAC). It is important to consider that when removing a packaged unit, it would be expected that electrical and/or gas disconnections, recovery of refrigerant, etc. would be required. This type of work would require the use of specialty tradesmen – not general demolition laborers.
Global Change Considerations and Replacement Items
An estimator should realize that the ‘DMO’ (Demolition) Retail Labor Rate will default across most, if not all, removal items on any given selection. As such, corrections made to Retail Labor Rates should be made globally across that specific trade. For flat roofing, for instance, an estimator should consider correcting the removal Retail Labor Rate for the membrane, insulation, parapet flashing, cant strips, cap flashing, high charges, etc. from ‘DMO’ (Demolition) to ‘RFG-M’ (Membrane Roofing).
It is also important to consider that select replacement (+) items may require change as well. For example, if a user selects termination bar, counterflashing and caulking for a flat roof termination, the replacement (+) Retail Labor Rates default to ‘RFG-M’, ‘RFG’ and ‘PNT’, respectively. Realizing that one laborer would be installing this termination, these items should all be modified to ‘RFG-M’ – the laborer who is actually performing the work. The user should also remove any unnecessary Labor Minimums applied by default, such as ‘RFGMN-A’ or ‘PNTMN-A’ in this example. The only Labor Minimum that would be applicable in this example would be ‘RFGMMN-A’.
Labor Burdens are applied on a trade-specific basis. For example, the Workers Compensation rate applied to ‘DMO’ (Demolition) labor is less than half the rate applied to ‘RFG’ (Roofing) labor.
Job-Personnel Overhead (Sub-Contractor O&P)
Job-Personnel Overhead costs are directly associated with the labor selection that a user inputs. Per Xactware’s published White Paper “Overhead and Profit”, “Job Personnel Overhead expenses
are included in the Labor Overhead portion of each unit price in the Xactware price list. The labor Overhead, along with expenses for Labor Burden and Worker Wage (wage paid to the individual) make up the Retail Labor Rate.”
Comparing the Job-Personnel Overhead expenses of ‘DMO’ (Demolition) labor, and ‘RFG’ (Roofing) labor, a user can identify that the overhead costs associated with a roofing trade exceed those of a demolition trade – see Figure 4. These overhead expenses include “vehicle costs, uniforms, mobile phones, depreciation on hand-tools owned by the company, etc. Job-Personnel Overhead also includes the portion of General and Administrative expenses and profit that correlate to employees performing billable tasks, and that are not included in the General Contractor O&P mark-up.” The White Paper continues on, stating that “…these expenses are incurred by either a general contractor using employees or by a sub-contractor, depending on who is actually performing the work.” It becomes critical for a user to determine the proper Retail Labor Rate for removal items in order to represent accurate overhead figures.
But What Is The Median Market Actually Charging?
Xactware instructs its users to modify pricing when any one line item is found to be an inaccurate representation of local market costs. Using a common roofing removal item (RFG300), we can
provide a comparison between Xactware price data and actual market data. On a CODE8X_JUL17 price list (Colorado, Denver; Xactimate 28; July, 2017), the difference between a ‘DMO’ selection
($51.30/SQ), and a ‘RFG’ selection ($119.71/SQ) is an increase of +$68.41/SQ. But is ‘DMO’ ($51.30/SQ) an accurate figure? Or is the ‘RFG’ rate of $119.71 warranted?
To verify, a user should check with local market costs. Choosing an objective source with a vast exposure to the market is important. For comparison, Angieslist.com was utilized (Figure 5), based on its exposure to the roofing industry and its objective and competitive nature. Angieslist.com reports that a “one story roof with a single shingle layer costs between $100 and $150 per square to remove.” One can reasonably determine that the median market would charge approximately $125.00/SQ for removal. Based on this data, a ‘RFG’ Retail Labor Rate selection meets market pricing. A ‘DMO’ Retail Labor Rate is substantially lower than what the market is charging – 41% lower, based on an average $125.00/SQ.
When Default Removal Retail Labor Rates Are Adequate
One must also consider scenarios in which the ‘DMO’ (Demolition) Retail Labor Rate may be adequate. For instance, during fire and flood losses, restoration companies regularly utilize demolition laborers in lieu of specialty tradesmen. In another example, let’s say there is an abandoned rooftop unit already disconnected, with its internal components and refrigerant previously evacuated. ‘DMO’ (Demolition) trade labor rates may suffice in these situations.
Ultimately, it is up to the estimator and the parties involved in a job to determine which items to use in an estimate, how they are applied, and the pricing.