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Last Post 04/01/2011 2:25 PM by  sdnash
"Supervision" Labor
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ihcalan
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03/26/2011 2:47 AM

     Hello - I need an opinion.  

    Lately, over the past few months, I've seen more and more contractor's adding the line item "supervision labor" to estimates.  This is above and beyond O&P, and in fact O&P is also placed on this supervision labor.

    Generally, I've been seeing this on mid sized residential losses - losses in the range of $50K-$150K.  When I comment and say supervision is included in O&P, I get a resounding "No - Overhead is to keep the lights on all of the time, when we actually have to go perform work we need to pay the people supervising the job, and we need to make a profit on top of that."  This supervision line item has been running about 5% of the gross estimate.

    So my question - Has this issue been popping up in other parts of the country?  How is everyone handling it?  I know I'll get some simple responses like "don't pay it"; however that answer is not very helpful especially when you are trying to reach an agreed price of repairs.

    Thank you for your input.

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    ChuckDeaton
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    03/26/2011 10:35 AM
    My first encounter was on commercial jobs, losses caused by Hurricane Katrina. Generally this line item shows up in estimates written for or by public adjusters.
    "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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    JimGary
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    03/26/2011 10:47 AM
    I have seen this on several losses when a GC is used. Usually commercial or as in your case larger homeowner claims. The company position was if they put someone on location to supervise, they paid it. I would get a name and number for the file.

    JWG
    I know the voices aren't real, but sometimes they're right!
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    Ray Hall
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    03/26/2011 11:30 AM

    This is a way to make a larger profit on an insurance job. The data base of all estimation programs should have about 30-35% net profit in the unit price.

    In the days of old the nails were figured by the pound and the lumber wis figured by the board feet and the paint by 400sf per gallon. Just take the job write your scope with out unit prices shown and put it out for bid. This is much more work, but don,t fall for the add on in the largest estimating system.The whole O & H profit fig. add on is extra profit. You should be incharge of approving the cost of repairs. Not the contractor. Just remember all the numbers on the paper is just that...numbers... unless YOU as the insurance carriers adjuster can get the work done for YOUR bottom line. Just try harder and do some shopping around.

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    Goldust
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    03/27/2011 7:59 AM
    if a GC hires a sub to do roofing ,Framing or whatever is needed the sub supervises their own crews. if it is a larger commercial claim ,The GC may have a foreman if it warrants one.The GC hires the sub to complete a specific job for an agreed upon price. I know there are a lot of different situations but not for a claim the size as you are talking about. If a GC can afford an estimator and not add that cost to his price why would this supervision cost be needed?? doesn't compute.
    What is your carrier saying about this issue?
    JERRY TAYLOR
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    Goldust
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    03/27/2011 7:59 AM
    if a GC hires a sub to do roofing ,Framing or whatever is needed the sub supervises their own crews. if it is a larger commercial claim ,The GC may have a foreman if it warrants one.The GC hires the sub to complete a specific job for an agreed upon price. I know there are a lot of different situations but not for a claim the size as you are talking about. If a GC can afford an estimator and not add that cost to his price why would this supervision cost be needed?? doesn't compute.
    What is your carrier saying about this issue?
    JERRY TAYLOR
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    ihcalan
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    03/30/2011 9:58 AM
    Thanks for the replies - I like the idea of getting the name of the person who will be onsite. Claims from this particular carrier are not as simple as one would expect, and going out and finding another contractor is not well received. Thanks for the advice everyone.
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    Catmandale
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    03/30/2011 1:59 PM
    I am thinking that it is an issue of complexity. Does the job and trade mix dictate someone to be onsite and oversee the processes?

    Keep in mind also that the foreman may be in charge of more than one project, so the hours may not be full time but an allocated percentage.
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    Leland
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    03/30/2011 3:29 PM
    I'll give you some hypothetical examples where supervision might be necessary and reasonable:

    1) A fire started due to a defective roof mounted generator. A crane is needed to remove it. The Highway patrol is involved because the crane will block a busy street. The crane company is charging $900 per hour. The adjusters for the neighboring properties, the liability carrier for the generator installer, and the liability adjuster for the generator manufacturer all want to observe and videotape the removal because of the subrogation potential (the generator is a critical piece of evidence). A portion of the building is structurally unsound, and the crane work could trigger collapse.

    A supervisor is reasonable, to coordinate everything.

    2) The contractor needs to meet with the structural engineer, city building inspector, and architect to devise a proper repair scope. The meeting takes 3 hours.

    In this case it might be reasonable to pay for the contractors time under "supervision".

    Just my opinion. Many times the "supervision" line item is just fluff, to inflate an estimate. Many times you can get a comparative estimate and a second contractor will be happy to work for a lower number based on their estimate that does not include unnecessary "supervision".

    I agree that it really is related to complexity, but also how time consuming something is.

    What if there were two subcontractors that need to work at the same time and the general need to stick around to make sure they didn't get in each other's way? Could happen, but it would be rare.
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    sdnash
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    04/01/2011 2:25 PM
    Unless it is a large job a couple hours a day of supervisor labor is what I have put in without any disagreement from adjusters. The only problem is if they put eight hours a day for three week, now thats pure fluff.
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