INSULATION · ENVELOPE AND STRUCTURE · FIXED BY STEP 03

Air barrier accreditation is a bid cost in overhead

You pay membership, QAP licensing, installer renewals, and per-project audits for the right to bid air barrier work, and almost none of it gets coded to the job that caused it.

WHY IT'S AN INSULATION PROBLEM

Most trades hold a license that applies to every job they take on, so burying it in overhead is honest. Yours applies to one slice of your work, and it's the slice that makes the schedule look full, so the fee gets treated as the cost of being in business. When the gate cost goes to overhead and the audit fee never reaches the bid, your batt and blow work pays for the air barrier work and no report says so.

WHAT IT COSTS

The size of it

A five-installer shop absorbs roughly $2,200 a year in annual fees before a single audit gets scheduled, and the per-project audits go into overhead too. The bid looks competitive and the job isn't.

OVERHEAD AT $1M–$5M

14%

CFOS target 13% for insulation.

GROSS MARGIN AT $1M–$5M

22%

CFOS target 24.5% for insulation.

NET PROFIT AT $1M–$5M

CFOS target 11.5% for insulation.

ABAA-specified projects want the company accredited, and a certified installer on the crew doesn't cover it. Published annual cost runs $1,000 for membership plus $700 for QAP licensing, then $100 per certified installer renewal and $75 per registered installer, and each installer needs 3,000 hours of applicable experience plus a course and an 80% exam before any of that counts. On top of the annual fees, individual projects require registration and third-party field audits priced job by job through ABAA's QAP calculator. The audit is a direct job cost, while the accreditation is a gate cost that exists only because one customer segment specifies it.

WHAT TO DO

Three moves, in order

STEP 01

Pull membership, QAP licensing, installer renewals, and exam costs into one overhead account, then divide by the air barrier revenue those fees gate so you know the rate you're absorbing.

STEP 02

Run the QAP calculator during estimating and put the project audit fee in the bid as its own line, coded direct to the job.

STEP 03

Sort last year's air barrier jobs by customer and check whether that segment covered its own gate cost. If it didn't, your pricing for that segment is wrong, not your luck.

THE FIX

Step 03: Overhead calculation

What indirect cost really comes to at your size, and the rate your estimating template should be using.

CFOS-03 · CHAPTER 3

The overhead rate your bid sheet should cover

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

BENCHMARKS

Insulation 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

You're bidding below your own overhead

If the overhead percentage in your estimating template is lower than what you actually run, every job you win loses money before a single hour is worked.

SAME TRADE

What else costs insulation contractors money

INSULATION · CFOS-06

Your fab clock starts when the fitters finish

You can't field measure covers until the mechanical contractor has set and tested pipe, so a six to ten week shop clock starts on a date somebody else picks.

INSULATION · CFOS-06

No 285 letter means no material and no billable line

The assembly needs its listing before you can release a pallet, and the review clock belongs to the design team. Then a rater has to look at the work before drywall covers it.

INSULATION · CFOS-01

Board feet never gets reconciled against sets burned

You estimate in board feet and buy in sets, and the yield between them moves with temperature. Some houses eat an extra set and nothing on the P&L says why.

INSULATION · CFOS-04

One mill letter reprices your entire builder backlog

Your per-plan price sheet is locked for twelve months while fiberglass and foam chemical reprice several times, so one letter hits every house in the backlog at once.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

CIVIL

The grading permit clock isn't on your schedule

Third resubmittal on the grading permit, the power pole relocation is six months out, and your crew and iron cost money while no party in your contract chain is at fault.

CONCRETE

The 28-Day Break Decides a Pour You Already Billed

You poured in March on an approved mix, the cylinders came back low in April, and two floors have already gone up on the slab in question.

DEMOLITION

Four Clocks Own Your Start Date And You Own None

The machine is on the pad, the crew is standing around, and everyone is waiting on a letter from the gas company. None of the clocks that release your start belong to you.

QUESTIONS

What insulation owners ask

ABAA accreditation cost per year for air barrier contractor?

You pay membership, QAP licensing, installer renewals, and per-project audits for the right to bid air barrier work, and almost none of it gets coded to the job that caused it.

What does it cost?

A five-installer shop absorbs roughly $2,200 a year in annual fees before a single audit gets scheduled, and the per-project audits go into overhead too. The bid looks competitive and the job isn't.

What do I do first?

Pull membership, QAP licensing, installer renewals, and exam costs into one overhead account, then divide by the air barrier revenue those fees gate so you know the rate you're absorbing.

What are insulation contractors supposed to be making?

Insulation runs 22% gross margin, 14% 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 03, overhead calculation. What indirect cost really comes to at your size, and the rate your estimating template should be using. It comes from chapter 3 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 insulation contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.

What a fractional CFO does for insulation contractors

AUTHOR

JOSH LUEBKER

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

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