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Last Post 02/23/2010 5:30 PM by  ChuckDeaton
Permits
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dcmarlin
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02/09/2010 10:31 PM

    In my 20-something years, I can probably count all the times I have added permits to an estimate on one foot and still have a little piggy or two left to go to the market or have some roast beef.

    I agree it is a legit cost which will (should) be incurred but feel, if you write a good estimate, there is plenty to cover this cost (whether or not O&P is applicable).  Never do I have an established local GC or local roofer ever ask to add for permits.  It seems the only group that even asks for this cost seems to be these "out of town" roofers or GCs who come to town when a hail storm hits. 

    Looking for a little feedback.  What do ya'll think?

    Gimme a bottle of anything and a glazed donut ... to go! (DLR)
    tleitch
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    02/09/2010 10:51 PM
    I agree! I have never had any one ask about permit. There is plenty of profit in just the estimate to cover it.
    ChuckDeaton
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    02/10/2010 1:29 PM

    In order to head off a class action suit, required permits, taxes and the like should be shown as a line item.

    Perhaps the vendor and company should be queried as to wheter or not a line item for permits should be included.

    Wait until a sharp plaintiff's lawyer gets you on the stand and asks why no permits, permits required to be legal.

    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
    claims_ray
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    02/10/2010 1:52 PM
    Permits are only paid when and if documentation of the expense is provided. In Florida after the 4 in '04 the permit cost was waived by the municipalities and there were roofers padding this into their bills.
    I am under the understanding that where O&P is given that the O as in Overhead is inclusive of permitting.
    I have only had a very few occasions where provided documentation of the cost of permits.
    This can be dealt with very simply if and when it occurs.
    BobH
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    02/10/2010 2:06 PM

    I agree w/ Claims_Ray, the file simply needs to be documented.

    Permit fees vary by local community, and with large fire claims I have seen 1 to 2 percent of cost of repair to determine the fee. Other items have a flat fee - and most estimating programs leave the value "0.00" noting it as a "bid item" which would be based on factual cost.

    Like Chuck said, you aren't going to "deny" legit fees (and I have seen them added to "overhead" and don't consider it to be included in overhead personally).

    Bob H
    rickhans
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    02/22/2010 3:59 AM

    I have included permit costs on major and large loss claims, but don't normally do it on claims that don't require a gc. However, if I think a permit will be required, I make a phone call to the permit office to find out if it is required and what their fee formula is.  I consider it to be a job cost just as much as material and labor. It definitly is not an overhead item any more than shingles or windows are.  As a contractor, I always include the permit and inspection fees in my estimates and have never had an adjuster or carrier balk at paying it.  I believe it is important for an adjuster to know the permitting and inspection rules in the area they adjust.  

    There are many more fees and costs now than there was just a few years ago. With the new "green" codes, builders often have to pay to have blue prints analyzed by software which is one charge, then 2 inspections by the insulation inspectors because the city code inspectors are not educated nor qualified to handle these.   There are more specialty items being added. 

    As of this year, the federal govt. requires all renovations of any house built prior to 1978 to be tested for lead, lead abatement procedures to be used if there is lead, and for the general contractor to have a person who is certified and licensed to oversee all work where there may be lead. That person has to be on the job continuous whether he is a contractor or employee. Many states are now implementing these rules into the state code.  Knowing how Dallas works, they probably will refuse to issue a permit until proof of compliance is presented. They did this for a while on other types of laws, and I believe will not now issue a permit until the energy analysis is completed on the drawings.  I think this will ultimately require the adjuster to obtain lead tests prior to completing an estimate on a house that falls into this catagory in order to get an agreed settlement with the insured and/or with the contractor.  In many cases, such as a major fire, this extra cost could push the repair cost beyond the limit resulting in a total loss that otherwise would not be.   In other words, I think this is going to be as big a deal as mold remediation was, but maybe not quite as costly.

    All of these types of costs now being added to renovation jobs are direct expenses and not overhead.  10% overhead is intended to cover the contractors vehicle, tools, office rental and  utilities, certifications of employees, advertising, and other such business expenses. It does not cover any direct expense for the job nor workers workers comp which can be another line item in the estimate depending on what trades are being used and whether the labor costs in the software include the WC expense.

     

    JimGary
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    02/22/2010 7:59 AM
    Posted By L on 09 Feb 2010 10:51 PM
    ............. There is plenty of profit in just the estimate to cover it.

     

    This is what a DOI would call "bad faith". Permits are a minor expense in most cases, but they are an incurred expense, and should be put on the estimate. In most cases it is not required on a simple roof replacement. In my hometown, we have a $10k threshold for premit requirements, and that may even be overlooked when just replacing the roof.

     

    The idea that the contractor should just take it out of his end will get you called on the carpet. There is also enough profit in our end to cover it also, but I doubt if you are willing to give it up.

     

    JWG

    I know the voices aren't real, but sometimes they're right!
    rest0red
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    02/22/2010 6:45 PM
    You guys are scarin' me! I'm moving from the GC restoration business into adjusting and I have to say... I see a lot of problems here. I've read forum topic after forum topic and see almost as many differing opinions on issues as responses. I realize this is a good place to get these things discussed and I will certainly continue to pay attention but since I decided to jump in, I'll ask this.

    What does it mean, "if you write a good enough estimate, there is plenty to cover this cost"?
    If you have structure damage, electrical damage, plumbing and so on, you pay for a permit based on the number of inspections performed. If framing is involved, there will most often be a rough framing inspection and a final, and the same thing applies to plumbing and electrical. If any of you that believe 10/10 is enough for a legitimate GC to have a profitable business, you have either never done it or it is the reason you are now an adjuster. In my hometown, anything beyond cosmetic, requires a permit and if you have to drop a ceiling you have to install hardwired smoke detectors, which I realize is a code upgrade issue but it kicks in an electrical permit. I think there is a lot of misunderstanding about this and a many issues where contractors are concerned. The easiest solution on this one is to pay permits on actual paid receipts. I know it's a supplement but if it's put in as an open item, the carrier isn't going to say a word. If they do, there is a category for that carrier.
    Leland
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    02/22/2010 7:55 PM
    In California, for whatever it is worth, the vast majority of carriers and adjusters pay for permits as a separate line item. Many carriers include that on an "as incurred" basis.

    I've never heard of permits being absorbed into O & P.
    dcmarlin
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    02/23/2010 12:41 AM

    Since I started this, I guess I will jump back in.

    I agree with everything ya'll are saying. A permit is a legit expense and part of the job cost just the same as a shingle or window is part of the job cost.  It should be covered and included in an estimate. The project manager will have to get the permit and later meet with the city inspector. All of this is time and money incurred by the contractor. It is not part of overhead and takes away from profit. I have no issues with adding in for a permit if incurred and/or presented. If it is required, just like state tax, it should be included.

    With all that being said, I guess what I was just trying to point out is, in the normal course of everyday business, when writing an precise and complete estimate, whether it is for a $2,500.00 hail damaged roof or a $500,000.00 fire or water damage loss, I can probably count all of the times I have actually added in a separate line item for a permit.

    I'll state again, never do I have an established local GC or local roofer ever ask to add for permits. It seems the only group that even asks for this cost seems to be these "out of town" roofers or GCs who come to town when a hail storm hits.

    Maybe, because it is usually a minor cost and, once the initial estimate is agreed, most contractors do not supplement for it. They know once an adjuster closes a file, it is a hassle to re-open it for this minor cost and they want to maintain a good relationship. Maybe, the adjuster added enough in other areas of the estimate and overall the contractor will easily reach its desired gross profit margin. Maybe, because it is a CAT situation and the municipality waived the permit fee. Whatever the reason, it appears (in my opinion) this is an issue encountered mainly when dealing with storm chaser type contractors.

    I'll admit, it ticked me off, after completing my estimate and obtaining an agreement on the scope and cost of the damage and dealing with a supplement, the contractor then hit me with this permit fee.   

    As for the 10 & 10, although a completely separate issue, most will agree a GC could not survive if only 20% is added to actual job costs. The average restoration GC has an overhead cost of approximately 25-30%. Most estimating programs used by insurance adjusters takes this into consideration.

     

    Gimme a bottle of anything and a glazed donut ... to go! (DLR)
    JimGary
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    02/23/2010 9:03 AM
    I guess coming from the auto side, I am used to supplements. If your lucky enough to get a veh at a shop, you can get a tear down and write a complete estimate. But most times, an auto estimate is written in the driveway or tow yard, and most carriers do not like assumed damage that cannot be photoed. The first hail storm which I did property, I thought I would never write another auto estimate. I mean you find damage, measure the roof, allow for waste, write the check and go to the next one, WOW. Then came the great claims drought. I was sure happy to be able to write an auto estimate then. Bottom line supplements are part of it, whether it is for permits, hidden damage, code compliance, rising cost or whatever.

    JWG
    I know the voices aren't real, but sometimes they're right!
    ChuckDeaton
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    02/23/2010 5:30 PM
    Maybe God will someday deliver an investment to me that pays a guaranteed 20%, but I am not going to hold my breath.
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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