The horizontal work: one turnkey site contractor, or do you hire the subs yourself

I've done it both ways on small stuff and the number that decided it for me was the coordination premium. Turnkey bid on a 9 lot job came in about 14% over the sum of the individual scopes I'd priced myself. On a deal where my whole margin was around 18% of revenue that's not a rounding error.

I also ate two weeks of standby because the paver showed up to subgrade the utility crew hadn't finished proof rolling, so call it a wash on that job. Second time I built a two week buffer between scopes into the schedule and it went fine.

What does proof rolling mean? I've read this thread twice and I'm following most of it but not that.

@rigging it's driving a loaded truck over the compacted subgrade so the inspector can see whether it deflects. If it pumps or ruts, that area gets dug out and replaced before pavement goes on. It's the checkpoint where the earthwork guy's work either passes or becomes his problem, which is exactly why @parcel's question about who owns the gap between scopes matters.

From running a service business with subs for five years, the thing that decides this isn't the markup, it's whether you can actually schedule. If you're not on that site most days you can't self-manage multi-trade work, and the price difference goes away the first time a crew mobilizes and can't start.

If you have a day job, buy turnkey and stop doing math about the premium.

Is there a middle option where you hire a construction manager for a fee instead of a GC with markup? I see that on vertical work all the time and I don't know if it exists in land.

@plumb yes, and on horizontal it's more common than people think, usually a percentage of hard cost or a flat monthly. You get the coordination without the trade markup, and you keep the contracts in your own name, which also means you keep the risk in your own name. That's the trade.

One thing nobody's said yet, the bond matters here. If the county holds a subdivision improvement bond or letter of credit on your improvements, the surety cares who's building them. A single site contractor with a track record in that county is easier to bond around than a first-time developer coordinating three separate crews. That has priced deals for me more than the 14% @flint is talking about.

@girder that's the point I came here to make. On renovation the scope creep comes from the walls. On horizontal it comes from what's under the dirt, and the difference is that unsuitable soil is measured in cubic yards at a unit price, so the overrun scales fast.

If you self-manage, get unit prices for undercut and import in every earthwork contract before anybody mobilizes. Lump sum with no unit prices is where you find out what a bad geotech assumption costs.

My honest fear, and I have zero deals done, is that I wouldn't know if a turnkey bid was 14% high or 40% high. Is there any way to sanity check a horizontal bid without having done one?

@pike ask your civil engineer for an opinion of probable cost before you bid it out. They do those routinely and they've seen recent bids in the same county. It won't be exact and it gives you a range to test the bid against. If a bid comes back well outside the engineer's range in either direction, you want to know why, and low is as worrying as high.

So the engineer both designs the improvements and estimates what they'll cost? Is there a conflict there, or is that just how it's done?

@juniper it's how it's done, and the design does drive the cost, so a design that's conservative on pipe sizing or road section costs you real money. That's an argument for having someone review the plans against the actual county standard rather than against the engineer's habit. I've seen a lender's third party review catch an over-designed storm system and take a meaningful number out of the budget.

On the main question, when we look at a development loan the borrower coordinating three separate trades is a different credit than the borrower with one contract and a schedule. Doesn't mean no, it means more questions and usually more equity.

Variance matters more than the mean here. Self-managed scopes have a lower expected cost and a much fatter tail. On a 22 lot deal where the improvement budget is a third of total cost, I'd take a 14% higher number for a tighter distribution almost every time, because the downside case is what kills the deal, not the base case.

The answer flips if the developer is genuinely a builder themselves. @flint self-managing is a different bet than @pike self-managing, and the poll can't capture that.

@sextant that's the clearest version of it. The question isn't which method is better, it's who's holding the schedule.

Running a small crew, I'll say the part contractors won't tell you. When a developer self-manages and calls me for one scope, I price the coordination risk into my number anyway, because I don't know who's ahead of me or whether they'll be done. So some of that 14% premium shows up in the individual bids too. The savings are real on small jobs where I can see the whole site from the road. They shrink fast once the job is big enough that I can't.