ACOUSTIC CEILING · INTERIORS AND FINISHES · FIXED BY STEP 04

Distributors bill your tile off the ship date price sheet

You bid off a March price sheet and got billed off October's, and there was never a way to lock the number.

WHY IT'S AN ACOUSTIC CEILING PROBLEM

There's no copper equivalent here to lock. Tile prices move on manufacturer list increases applied at ship date and grid prices follow galvanized steel, so a signed lump sum has two separate escalations running against one frozen number. Trades buying commodity material can at least watch an index; you're watching a distributor's effective date that gets announced after your bid is already in.

WHAT IT COSTS

The size of it

Material is typically 40 to 50 percent of an ACT bid, so a single 6 to 8 percent list increase between bid and buyout on a job that ships seven months after bid takes roughly 3 points off gross margin. A second increase in the same year takes it twice.

OVERHEAD AT $1M–$5M

13%

CFOS target 12% for acoustic ceiling.

GROSS MARGIN AT $1M–$5M

21%

CFOS target 23.5% for acoustic ceiling.

NET PROFIT AT $1M–$5M

CFOS target 11.5% for acoustic ceiling.

Mineral fiber tile has no futures market, so there's nothing to hedge. Armstrong, USG, and Rockfon publish annual or semi-annual list increases with 60 to 90 days notice, and the distributor applies whichever sheet is live on the day your material ships. Grid is roll-formed galvanized steel, so it takes steel and aluminum tariff moves on top of the list move. On a lump sum bid with no escalation language, every dollar between your bid date and the ship date belongs to you. Placing the order early and taking stored material is the only hedge available, and it converts a margin problem into a cash problem.

WHAT TO DO

Three moves, in order

STEP 01

At bid time, get the announced increase date and the distributor's effective-date terms in writing, and note the ship date you assumed right on the bid.

STEP 02

Put a price hold or escalation clause in your proposal: material priced off the current sheet, good for a stated number of days, with increases passed through and the manufacturer's notice attached as backup.

STEP 03

When the schedule pushes past an announced increase date, price the early buy and stored material against the margin you would lose, and make it a cash decision with both numbers in front of you.

THE FIX

Step 04: Estimating system

The estimate maps one to one onto the job cost codes, so variance means something the day it appears.

CFOS-04 · CHAPTER 4

Make the estimate and the job cost report match

What this step changes, what it depends on, and how to tell it's installed.

BENCHMARKS

Acoustic ceiling by revenue band

All 7 bands are published. The CFOS target is beside the figure up to $10M to $25M, and the 4 bands above that are labelled modeled.

ACROSS EVERY TRADE

The estimate and the actual never match

You can compare the estimate to the job cost report, but the two use different words, so the comparison means nothing.

SAME TRADE

What else costs acoustic ceiling contractors money

ACOUSTIC CEILING · CFOS-04

One line item covers four trips through the building

You bid one trip through the building. The crew has been back four times, none of it is a change order, and job cost still shows one line for ceilings.

ACOUSTIC CEILING · CFOS-06

Everyone above your ceiling cracks tile and no one signs

Every trade that goes above your ceiling cracks tile, and you're the one replacing it, weeks later, on your own money.

ACOUSTIC CEILING · CFOS-06

Your longest lead item is 3 percent of the square footage

The lobby ceiling is on a boat somewhere and it's holding your last mobilization, your final pay app, and your retention.

ACOUSTIC CEILING · CFOS-01

Attic stock is bought in month one and earned in month twelve

No one pays you for the extra cartons you buy, store for a year, and leave in a closet at closeout.

ACOUSTIC CEILING · CFOS-08

Sag appears eight months later and the warranty is gone

The building wasn't conditioned when they made you install. The tile sagged eight months later, and the callback was yours.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

CIVIL

You bid cubic yards and pay by the ton

You bid 40,000 yards of import and every scale ticket comes back in tons. The biggest cost line on the job is measured in a unit your contract never defined.

CONCRETE

Your Ready-Mix Quote Expired Eleven Months Before the Pour

Concrete has about a 90-minute working life from batch to placement, so your supply market is a haul radius with two or three plants. They quoted a market that's gone.

DEMOLITION

Your Bid Locked A Scrap Price The Market Never Honored

You priced the steel credit in February and crossed the scale in October. The market moved and the subcontract had no escalation language for it.

QUESTIONS

What acoustic ceiling owners ask

Ceiling tile price increase between bid and buyout?

You bid off a March price sheet and got billed off October's, and there was never a way to lock the number.

What does it cost?

What do I do first?

At bid time, get the announced increase date and the distributor's effective-date terms in writing, and note the ship date you assumed right on the bid.

What are acoustic ceiling contractors supposed to be making?

Acoustic ceiling runs 21% gross margin, 13% overhead and 8% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 1 point above it. The CFOS target is 11.5%.

Which part of the system fixes it?

The step is number 04, estimating system. The estimate maps one to one onto the job cost codes, so variance means something the day it appears. It comes from chapter 4 of CONTROL: The Construction Financial Operating System.

OR HAVE IT HANDLED

Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for acoustic ceiling contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.

What a fractional CFO does for acoustic ceiling contractors

AUTHOR

JOSH LUEBKER

MASTER ELECTRICIAN · 150+ PROJECTS · $2.1B+ MANAGED

Wrote CONTROL, the 8 step system behind these figures. More about the author.