Reasonable mark-up on contractor supplied goods (Electrical work)

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SirHumphreyAppleby

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#309224 30-Sep-2023 07:21

I am just reviewing a couple of invoices for electrical work that was carried out as part of a much larger project and it appears the mark-up on supplied parts is very high.

What would you consider to be a reasonable margin? I would be interested in hearing from both consumers and those of you in the electrical field.

The Consumer Guarantees Act requires that materials be supplied at a reasonable cost. A quick search online indicates common TPS cable (nothing special that would need to be ordered) has a markup in the region of 70% for one product and the per-meter price is above retail (Bunnings) for another. To be clear, these are the same products - same brand, quantity and part numbers as appear on the invoice.

The most egregious example I have found so far is the price for a PDL GPO (single). They have charged more than double what I would pay for the same product.

This particular job is a long way from home, so we couldn't use the usual electricans I deal with (they won't travel that far), but none of them have ever marked up a power point by anything like $20.

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#3136747 30-Sep-2023 07:45

What were the Ts & Cs on your purchase order?

If it’s not a quoted job on their Ts & Cs they can charge whatever they like, within reason. If they say our policy is we charge trade price unless otherwise quoted then you can’t argue.

Given the sh1tshow that is “trade” pricing at electrical merchants you really need a cost plus agreement to make it competitive.

gregmcc

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#3136750 30-Sep-2023 07:54

A standard single power point (PDL691) list price is $31.90 before gst, (From JA Russell) the contractor buy price may be significantly cheaper depending on the buying power they have with the suppliers.

from my experience a 30% markup on the buy price is standard, taking this into account it is still way cheaper than the standard list price.

SirHumphreyAppleby

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#3136751 30-Sep-2023 08:33

gregmcc:

from my experience a 30% markup on the buy price is standard, taking this into account it is still way cheaper than the standard list price.

I agree, 30% is much more reasonable. If I needed some obscure product that wasn't routinely stocked in the back of the van, I'd have no issue paying a small premium for it, particularly if they had to buy in bulk (e.g. 100m cable when I only need 60m).

I normally supply PDL 600 sockets and switches, this time being no exception. I looked up another recent job, where it appears we came up short by one double power point (PDL 692)... I was charged $23.62 by the electrician versus $18.24 I paid for the rest, almost spot on the 30% margin you indicate is standard.

tweake

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#3136851 30-Sep-2023 11:05

businesses charge whatever they can get away with.

many decades ago 30-40% markup was common, but you also had anything from 0-30% discount off buy price. that sounds high, but thats really low. today not uncommon to have 200-500% markups depending on the product.

the simple problem is you can't make a living off labor rate. if you charged what your time is actually worth then you get no work. customers do not value skill or knowledge. so all that margin gets put onto product. thats common across a lot of trades.

but also sparkies are the highest markup of the building trades and is purely a profit driven industry. they are in it only to make big $$$. hence tons of scams, rip offs etc.

CamH

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#3137013 30-Sep-2023 14:16

We're in IT, but vary back and forward. Anywhere from 0% markup to 50% markup depending on what labour we're charging and who the client is (managed services client, retail client, education or NFP etc).

I don't believe there's anything stopping people from charging whatever they like if it's pre-quoted. The consumer guarantees act only covers you if you haven't agreed to a price already. An example of this is if you ask an electrician to put in a light switch, they come over and do it without quoting but then charge you $500 in labour and $500 for a single light switch. You'd have some recourse there, but not in your current situation.

I think it's also worth noting that a lot of places now are adding the cost of obtaining items. The cost for someone to go and pick it up, check it's correct, any admin time to order etc, so often you'll see prices above retail to allow for this.

MadEngineer

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#3137014 30-Sep-2023 14:30

It’s fairly normal to be charged a good rate if you’re buying a bunch of gear vs a single outlet.

You're not on Atlantis anymore, Duncan Idaho.

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sir1963

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#3137017 30-Sep-2023 14:37

"Trade price" is a bit of a joke, you will find trades get 30%-60% or more off "trade price".

SirHumphreyAppleby

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#3137018 30-Sep-2023 14:43

sir1963:

"Trade price" is a bit of a joke, you will find trades get 30%-60% or more off "trade price".

Sure is. Joe Bloggs walking in off the street will typically get at least 25% off the list price without even asking.

SirHumphreyAppleby

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#3137020 30-Sep-2023 15:00

CamH:

I don't believe there's anything stopping people from charging whatever they like if it's pre-quoted. The consumer guarantees act only covers you if you haven't agreed to a price already. An example of this is if you ask an electrician to put in a light switch, they come over and do it without quoting but then charge you $500 in labour and $500 for a single light switch. You'd have some recourse there, but not in your current situation.

Correct, people can charge whatever they like, if there is agreement. The CGA only applies when costs haven't been agreed in advance, which is the case here. It does not specify when costs become unreasonable, however, the industry standard is a good starting point (based on Consumer NZ comments). When they're billing above two and times the industry standard, I'd say it's definitely unreasonable.

Bung

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#3137084 30-Sep-2023 17:03

SirHumphreyAppleby:
I am just reviewing a couple of invoices for electrical work that was carried out as part of a much larger project and it appears the mark-up on supplied parts is very high.

Maybe your problem was they recognised it was part of a large project and for them it would be a one off.

SirHumphreyAppleby

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#3137091 30-Sep-2023 17:43

Bung:

Maybe your problem was they recognised it was part of a large project and for them it would be a one off.

Well, he won't be getting any more of my business, which is a pity, because we need someone we can rely on in that part of the city.

The electrical work was quite extensive, including multiple full days work. On other small jobs I've had done recently (~3 hours), I've been charged in line with Greg's stated industry standard.

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Handle9

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#3137103 30-Sep-2023 18:31

SirHumphreyAppleby:
CamH:

I don't believe there's anything stopping people from charging whatever they like if it's pre-quoted. The consumer guarantees act only covers you if you haven't agreed to a price already. An example of this is if you ask an electrician to put in a light switch, they come over and do it without quoting but then charge you $500 in labour and $500 for a single light switch. You'd have some recourse there, but not in your current situation.

Correct, people can charge whatever they like, if there is agreement. The CGA only applies when costs haven't been agreed in advance, which is the case here. It does not specify when costs become unreasonable, however, the industry standard is a good starting point (based on Consumer NZ comments). When they're billing above two and times the industry standard, I'd say it's definitely unreasonable.

You’ve mentioned the CGA a few times. From what you have written this sounds like a B2B transaction where the CGA would not apply.

SirHumphreyAppleby

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#3137122 30-Sep-2023 18:45

Handle9: You’ve mentioned the CGA a few times. From what you have written this sounds like a B2B transaction where the CGA would not apply.

Off topic, but that is actually a common misconception about the CGA as the definition of consumer can include businesses and other legal entities. The CGA applies to goods or services ordinarily acquired for domestic purposes, regardless of who is paying the bill. In this case, the work is entirely residential. B2B transactions can contract out of the CGA, which hasn't happened in this instance.

Handle9

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#3137127 30-Sep-2023 18:51

SirHumphreyAppleby:
Handle9: You’ve mentioned the CGA a few times. From what you have written this sounds like a B2B transaction where the CGA would not apply.

Off topic, but that is actually a common misconception about the CGA as the definition of consumer can include businesses and other legal entities. The CGA applies to goods or services ordinarily acquired for domestic purposes, regardless of who is paying the bill. In this case, the work is entirely residential. B2B transactions can contract out of the CGA, which hasn't happened in this instance.

The short answer with the CGA and B2B transactions is it depends. The battle of the forms usually covers contracting out, where if they said at any point it was subject to their T&Cs it’ll usually be in there. If you don’t reject their T&Cs then that’s that.

SomeoneSomewhere

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#3137979 2-Oct-2023 20:45

CGA B2B contract-out needs to be *in writing* IIRC. So unless you actually signed something up-front or they specifically sent terms and asked you to agree to them, it's still covered by the CGA. And if you do that, you've probably got a contract covering hourly rate and supply markup.

From Consumer Protection:

you as the buyer and the seller are in trade and agree to this
the agreement is in writing
it is fair and reasonable to do so.

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