PROCESS PIPING · MECHANICAL AND LIFE SAFETY · FIXED BY STEP 03

Weld Qualifications You Paid For Before Day One

You wrote checks for PQRs, third-party lab tests, and welder requalifications weeks before a single joint was billable, and none of it got tagged to the job that caused it.

WHY IT'S A PROCESS PIPING PROBLEM

This is the cost of being allowed to start, and the code sets the expiration date, not you. A framing crew doesn't expire. Your welder does, on a six-month clock that runs whether or not there's work in that process, which is why the spend piles up in slow months and reads as general overhead instead of the price of a specific job.

WHAT IT COSTS

The size of it

Procedure qualification typically runs $1,500 to $5,000 each plus lab fees, and requalification runs $400 to $1,200 per welder. A shop with 12 welders and three new procedures is $15K to $25K out the door before day one, parked in a bucket that never shows whether the bid covered it.

OVERHEAD AT $1M–$5M

16%

CFOS target 15% for process piping.

GROSS MARGIN AT $1M–$5M

24%

CFOS target 26.5% for process piping.

NET PROFIT AT $1M–$5M

CFOS target 11.5% for process piping.

Under ASME Section IX and B31.3 you can only weld inside a qualified range. A new material grade, thickness, position, or process on a job means a new PQR, so you run coupons, ship them to a third-party lab, and wait on tensile and bend results. Owner-added requirements like Charpy impact for low-temp service or a client-specific procedure review can invalidate procedures you already own. Then every welder needs a WPQ on that procedure, and qualification lapses if he hasn't run the process in six months, so between jobs you either pay to keep men current or pay to retest them at mobilization.

WHAT TO DO

Three moves, in order

STEP 01

Build a live matrix of every WPS you hold and every welder's continuity date, and run it against the next 90 days of bid work before you quote anything.

STEP 02

Open a job-specific cost code for qualification so a job demanding a new procedure absorbs its own test and lab cost, and leave only continuity maintenance in overhead.

STEP 03

Add a qualification line to every estimate that spells out the grade and process, priced off your last lab invoice.

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

Process piping 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 process piping contractors money

PROCESS PIPING · CFOS-06

One Missing Valve Print Stops 200 Spools

Pipe is on the ground, welders are on the clock, and 200 spools can't be cut because one valve vendor hasn't released a certified dimensional print.

PROCESS PIPING · CFOS-05

Your Final Pay App Is Waiting on a Binder

The system holds pressure, the crew is long gone, and the final application waits because one fitting's MTR never made it into the turnover package.

PROCESS PIPING · CFOS-04

Nickel Moved and Your GC Looked at Steel

You bid 316L in March, bought it in July, and the escalation answer came back pointing at a carbon steel index that never budged.

PROCESS PIPING · CFOS-06

The Last 10 Percent Costs Four Mobilizations

You built to the flange, demobilized, and came back three more times waiting on a vessel the owner bought, re-renting the crane every trip.

PROCESS PIPING · CFOS-01

Forty Grand of Spools You Can't Bill

Your shop is running two months ahead of the field, the spools are stacked in the yard, and the GC won't pay a dime for stored material.

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 process piping owners ask

How do I account for welder qualification and PQR costs on a job?

You wrote checks for PQRs, third-party lab tests, and welder requalifications weeks before a single joint was billable, and none of it got tagged to the job that caused it.

What does it cost?

What do I do first?

Build a live matrix of every WPS you hold and every welder's continuity date, and run it against the next 90 days of bid work before you quote anything.

What are process piping contractors supposed to be making?

Process piping runs 24% gross margin, 16% 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 process piping contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.

What a fractional CFO does for process piping contractors

AUTHOR

JOSH LUEBKER

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

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