Utah Contractor Practice Exam

What should not be included in the price of your bid when bidding on work?

1. Overhead

2. Worker's compensation insurance premium

3. Profit

4. All of the above

The correct answer is: Worker's compensation insurance premium

When submitting a bid for work, it is crucial to understand the components that should be included in the pricing structure. The correct option here is that worker's compensation insurance premium should not be included in the bid price. The reason for excluding the worker's compensation insurance premium from the bid is that this cost is typically handled as a separate expense rather than being factored directly into the contract price. This allows for more accurate pricing while considering that costs for worker's compensation can vary based on the nature of the project and the classification of the workers involved. It also provides the contractor flexibility in managing their costs and ensures clarity for the client regarding the base price for the work being bid. In contrast, the inclusion of overhead and profit is a standard practice when preparing a bid. Overhead accounts for general business costs that are not directly tied to a specific project, such as administrative expenses, utilities, and equipment costs. Profit is also an essential component, as it is the amount that the contractor needs to earn for taking on the risk and investing time and resources into the project. Therefore, while overhead and profit are integral to calculating a bid, the exclusion of worker's compensation from the bid helps streamline the pricing and keeps it transparent for both contractor and client.