Garrett,
I'm sure that whatever the hourly, daily or lump sum price that your contractors are charging includes some amount of 'mark-up'. Mark-up is the profit ratio you charge to earn your profits. We do this all the time in the real world.
If you know your operating costs, your material costs and do a good job at estimating the amount of 'time' (there's that word again!) to perform the job, you multiply that figure by the percentage of profit you intend to make. The percentage is the amount of 'mark-up' or profit ratio.
In the real world, several years ago, it was not uncommon to charge anywhere from 20% to 45%, or more, marked-up for the profit margin. With today's depressed economy the mark-up ratio is bound to be lower (less than 25% and even maybe just above cost) in order to get the work or be awarded a project. Job bidding is very competitive these days as companies are hungry for work in order to keep their skilled workers employeed. If you lose your skilled talent, you run the risk of not being prepared when the work (economy) picks back up.
The exercise for you would be to assess the task(s) at hand: Include the amount of manhours (especially if by the hour), how many employees are needed and their rate(s) of pay. Compute the costs of materials and any tools required (especially if they need to be purchased prior to starting work or if they are considered 'consumables' like welding rod, grinding wheels, etc.). If your do an accurate job estimating here, you will discover "what it costs". Compare those numbers to the numbers the contractors are charging (keep in mind what the actual 'contract' covers which may include some 'extras' or 'warranties').
Lasty, is the paid staff still able to perform the regular daily routine AND the extra work load that the contractors are performing? Would additional paid staff need to be hired to keep the work 'in house' and how does that affect your original estimate compared to the going rate that the contractors are charging?
Gets real tricky quickly. This is why companies pay good estimators, good money. A good estimator can make or break any company, but you also need a talented work force to back up the estimator. It's all a team effort whether you are looking to make a profit (contractor or job shop) or looking to trim maintenance costs (private or museum operation).
Erik Young
Caltrans CEO II, Long Barn Road Crew 664: 2018-Present
Caltrans CEO II, Sonora Road Crew 662: 2015-2018
Caltrans CEO II, Merced West Crew 694: 2010-2015
Engineer/Fireman: Hetch Hetchy & Yosemite Valleys Railway
Engineer/Fireman/Conductor: Railtown 1897 State Historic Park 1996-2010
CMO Dardenelle & Eastern Ry
Operating Engineer: init. 12/1985, IUOE Local #3
'Steam Freak At Large'
