OSE Build Cost
Contents
Model
It took 2 years for me to understand this, and for us to prove a competitive build model to industry standards. Here is a detailed assessment of OSE Build Cost, compared to industry standards.
Industry Standard Construction
- Subcontractor margin is 54% typical , so 100% markup [1]. This is industry standard.
- Contractor margin is 35%, or about 54% markup [2]. This is industry standard.
- 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
- 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.
- This can be reframed as the 'labor cost' over materials only is $120k.
- This constitutes the Build Cost Formula in a typical scenario, based on markup over materials. Markup includes labor.
- this is consistent with the NAHB Build Cost detail breakdown.
OSE Build Cost
- By comparison, our cost is $60k+$25k (1000 hours *$25/hr doable with semi-trained workers, 85% 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.
- Highly skilled version: 500 hours
- Unskilled version: still doable, but takes 2000-3000 hours.
- This looks like a formidable enterprise flywheel that will spin up all other OSE operations and thus begin to deliver on its promises.
- 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?
Bottom Line
- $85k build cost OSE, $180k build cost industry standards. OSE features 2.2x lower build cost.
- $25k labor cost OSE, $120k 'labor cost' industry standards. OSE features 4.8x lower labor cost.
Industry Standards
- 10/10 rule of overhead/profit for a builder enterprise. [3]
Sequencing
Seed Eco-Home Materials Cost Reduction - 3D Printing, Machines, + CEB
With $20.5k cost savings (CEB + 3D Printing, see Seed Eco-Home Materials Cost Reduction) from the standard cost of $60k, we are at $39.5k in materials. The hard build cost becomes $39.5+$25k labor - or $64.5k. This is a 65% cost reduction if automated equipment (3D printing, automated CEB production and automated assist in laying) is used.
There is further about $2.5k in machine rental costs(site prep, foundation grading, foundation work, water trenching, sewer trenching, power trenching, driveway, final landscaping, telehandlerhandler), so the overall build cost can be reduced to $63k per house. This is a 67% reduction in construction cost compared to industry standards.
These are nominal numbers and a model. The actual quality matters, too: design integration allows us to achieve more function with less effort - pending sophisticated design. THis means that we are not comparing ourselves to 'builder grade' - but to high quality housing. Such as the stock PV that comes with every house.
The CEB and machines and 3D printer savings can be attained at an approximate R&D budget of $1.75M, from which point machines cost about $150k for the MultiTractor (tractor, dozer, automated controller-based heavy machine set):
- $100k design of soil conditioner
- $100k in new design costs for the CEB version of the house
- $100k design of brick carrier rover
- $100k design of CNC torch table
- $100k production engineering of all the machines via an integrated microfactory
- $100k design of multitractor frame
- $100k design Power Unit (18-360 hp scalable, with Universal Track Unit, Universal Wheel Unit)
- $600k design cost for backhoe, posthole digger, dump trailer, trencher, forks, forestry attachment, mower, chipper, rock crusher, telehandler, forks, and brick carrying rovers
- $100k in materials for above heavy equipment base consisting of 8 Universal Track Units at 2800 lb drive each, 8-plex Power Cube (128 hp) stackable to double the power with remote start, 360 degree backhoe, 2 base frames, 1 cab, 1 Universal Hydraulic Controller Unit
- $60k prototyping cost (welding, fabrication, 1 person year)
- $100k Design cost for Large Workshop Structure
- $100k RTK GPS CV AI controller for the tractor, sequenced from remote control, to mission planning, to sensors, to grading, etc. Capable of up to 12 channels programming (automated backhoe and all other implements) such that both the drive and complex functions can be manually controlled, remote controlled, or mission planned.
3D Printing:
- $50k high temperature chamber design for 3D printing
- $30k for a filament maker off the shelf
- $12k for shredder off the shelf
- $48k - 48 Supervolcano printhead capacity cluster with high temperature heated enclosure
Solar Concrete and Solar Steel
Here we decentralize to Solar Concrete via a 400 kW PV array at every campus.
- 8% reduction [4] of global warming via Solar Concrete
- 11% reduction in global warming via Solar Steel. [5]
Assumptions
Model assumes semi-skilled labor - generalist tool use and ability to read blueprints and mark them up to cheatsheets. Model assumes that OSE is capable of training for basic performance in 17 trades in the time it takes to learn one trade in the industry-standard route. This is achievable via Design Degeneracy afforded by Modular Design.
