How do you calculate a reasonable price when bidding on a contract?
Calculating a reasonable price -- profitable for you and acceptable to the client -- is a very challenging issue facing any contractor.
[Warning: the rest of this post is supposed to be a joke!]
Three contractors are bidding to fix a broken fence. One is from New York, another is from Tennessee and the third is from Florida. All three examine the fence.
The Florida contractor takes out a tape measure and does some measuring, then works some figures with a pencil. 'Well,' he says, 'I figure the job will run about $900: $400 for materials, $400 for my crew and $100 profit for me.'
The Tennessee contractor also does some measuring and figuring, then says, 'I can do this job for $700: $300 for materials, $300 for my crew, and $100 profit for me.'
The New York contractor doesn't measure or figure, but leans over to the government official and whispers, '$2,700.'
The official, incredulous, says, 'You didn't even measure like the other guys! How did you come up with such a high figure?'
The New York contractor whispers back, '$1,000 for me, $1,000 for you, and we hire the guy from Tennessee to fix the fence.'
'Done!' replies the government official.
My apologies to contractors from Florida and Tennessee.