Cost Estimate - Profit 1

[foreng]

I am currently working on an estimate to use in a rate negotiation with an owner/operator of a machine that has no Blue Book rates. Upon doing some research I have calculated the estimated ownership (fixed) and operating (variable) costs, and a general overhead value. The operating costs include an operator wage and a wage loading. I am stuck on how to add profit and risk to this estimate? Some estimates I've found apply profit and risk to the total ownership and operating cost portion (e.g. 10%-15% of ownership+ operating), while others have removed the wage component from the profit calculation and add it in at the end ((10%-15% of ownership + (operating-wages))+wages). Does anyone have any suggestions, keeping in mind I'm trying to get the lowest (logical) rate possible in order to start the negotiation (which I am sure will be higher by the end of it)?

 

[DRC1]

The Blue Book has a breakdown on calculating rates for equipment. Technically the blue book covers all operating and ownership costs associated with the equipment. Blue book rates do not cover the operator's wages. The Blue Book does not contain a markup for overhead or profit. I have seen many contracts that only pay Blue Book with no mark up. I have seen others that pay 10 to 15%.
I would check with how your State's DOT handles equipment costs. Most states use Blue Book. DOTs' typically do a large volume of extra work, and often their prctices can be used as a standard when working with a private or municipal owner. Finally, I would check with local equipment dealers to see for what similar pieces of equipment rent. That way you can see if you are reasonable.
Most equipment carries a different rate for daily weekly or monthly rentals.