OSE Build Cost

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It took 2 years for me to understand this, and for us to prove this 75% so far:

  1. Subcontractor margin is 54% typical , so 100% markup [1]. This is industry standard.
  2. Contractor margin is 35%, or about 54% markup [2]. This is industry standard.
    1. Note that there is a lot of confusion regarding 'margin' and 'markup', and there are many numbers that float around the internet, but the above 100% and 54% markup are consistent with OSE's observations and online query
  3. This means that if you compound these, the cost over materials (for labor of contractor and subcontractor) is 3.1x the cost of materials!!! To see this, imagine $60k in materials, the subs charge the general contractor $120k total, the contractor hiring the subs takes in 0.54*120k + $120k = $184k. This is just the production cost of a house, no land/legal/anything else.
  4. By comparison, our cost is $60k+$25k (1000 hours *$25/hr doable with semi-trained workers, 75% data-backed build time assumption), plus our construction manager (construction manager industry standard pay is 5-15%), and in our case on the low end of 5% because of the reduced build time. So our apples-to apples comparison is $90k vs $184k house. This means, that without even considering 'profit' - we are at $94k net advantage per house over the competition. This $94k is the advantage we have for a small house 2 bath/3 bed of 1300 sf, and it will be greater than this for larger homes. Our cost/sf goes down for larger homes, while our cost advantage to the customer increases over the competition.
    1. Highly skilled version: 500 hours
    2. Unskilled version: still doable, but takes 2000-3000 hours.
  5. This looks like a formidable enterprise flywheel that will spin up all other OSE operations and thus begin to deliver on its promises.
  6. Bottom line: out model allows for robust operation while still selling at a lower cost (as our quality is much above builder grade - who provides 5kW PV in their base offering?). Bottom line is that from first principles, our model is designed to succeed under many scenarios where others would not be able to build or venture.

Do you see any defects in my logic so far?