Who Pays For Utilities During Construction? (Explained)

 

Construction work requires a significant amount of electricity, and it can also require gas or plumbing.

If you need to create a detailed budget for a construction project, you need to know who is responsible for these utility costs.

We will cover utility usage during construction and who pays for those construction costs.

 

Who Pays For Utilities During Construction?

 

Unless the agreement explicitly states otherwise, the general contractor of a new construction or a complete rehab pays for the utilities and associated permits during construction, adding them to the cost of the job.

For renovation projects, the owner of the property will usually cover utility expenses.

Ultimately, all details will be laid out in the contract.

The general contractor also arranges for the utilities if necessary.

The project manager, on the other hand, takes over the responsibility of finalizing paperwork and collecting the required signatures.

 

Why Does The General Contractor Assume Responsibility?

 

The general contractor generally assumes responsibility for utility costs during construction.

This gives them flexibility when choosing how they want to obtain said utilities in situations when the project site doesn’t have utilities.

The contractor also can choose the contract they use and how they charge the customer.

They also have more of an incentive to reduce utility costs as much as possible since they end up footing the bill.

 

Does The Homeowner Ever Take On Responsibility For Utility Costs?

 

Homeowners often take on the utility costs for small projects when utilities are well established.

In these cases, the contractor will plug right into the homeowner’s outlets.

If a homeowner has electricity but will accrue expensive electric bills, both parties have a responsibility to research the estimated costs and decide how to handle them before construction starts.

 

Utility Use In Construction

 

Utilities refer to the expense for the hookup and usage of:

• Electricity
• Gas
• Water
• Sewage

Contractors use electricity to run power tools, heating/cooling units, lights, and charge cell phones.

Gas comes into play when the job uses gas-powered appliances, machinery, or devices.

Water must be available for hydration, cleaning, and as part of the construction process when mixing materials.

Sewage must be in place to allow workers to sanitarily dispose of waste.

 

Hard Costs Vs. Soft Costs

 

Costs for a construction project fall under one of two categories: hard costs or soft costs.

Knowing this can help you stay up to date on the conversation when talking to your builder.

Hard costs refer to the actual cost of on-site construction and fixed equipment, while soft costs refer to the additional expenses that occur in the background.

Utilities fall under the category of hard costs.

Additional hard costs include:

• Labor
• Materials
• Paving

Soft costs include:

• Furniture
• Moveable equipment
• Legal fees
• Permit fees
• LEED Certification

 

Electrical Usage In Construction

 

Electricity expenses make up about 10% of all construction projects.

However, some construction projects require more electricity than others, with hospitals requiring the most electricity during construction and apartments needing the least.

See the following estimated expenses of electricity for the different types of construction projects (assuming electricity on-site):

• Apartments = $7.80 per square foot
• Banks = $14.89 per square foot
• Hospitals = $29.58 per square foot
• Hotels = $15.98 per square foot
• Office Buildings = $21.59 per square foot
• Retail Stores = $10.69 per square foot

 

Temporary Electrical Setup

 

If a construction site doesn’t already have permanent power in place, the contractor will require temporary power.

To obtain a temporary power pole, the contractor will need to obtain a permit.

This costs roughly $30 to $60.

Next, an inspector will need to examine the setup, which can cost up to $500.

After you get the seal of approval from the inspector, the power company will set up the power for a hookup fee that costs anywhere between $450 and $750.

All in all, the setup for temporary power costs anywhere between $1,700 and $4,500.

This does not include the cost of the electricity.

 

Gas Usage In Construction

 

The construction sector makes up 55% of off-road fuel use in America.

Out of this, 98% of the fuel used is diesel.

To get fuel to the job site, you can hire a regular delivery service or bring the fuel yourself.

Some of the machines and vehicles that use diesel include:

• Bulldozers
• Cranes
• Earthmovers
• Excavators
• Pavers

The national average price for diesel fuel at the moment is $3.294, but prices fluctuate.

If you use a delivery service, you need to add the cost of delivery to the price.

 

Using A Fuel-Powered Generator

 

If installing a temporary power pole costs too much, some contractors opt to use a fuel-powered generator to power the construction site.

Of course, that comes with a cost as well.

The average cost to rent a generator is based on the power capacity of the generator as follows:

• 20 kilowatts = $625/week or $1300/month
• 40 kilowatts = $845/week or $1600/month
• 100 kilowatts = $1385/week or $3250/month
• 200 kilowatts = $2350/week or $5120/month
• 500 kilowatts = $3975/week or $11,910/month
• 750 kilowatts = $4840/week or $14,125/month
• 1000 kilowatts = $6245/week or $18,730/month
• 2000 kilowatts = $9900/week or $29,700/month

You can use diesel fuel to power the generator.

 

Alternative Fuel Options

 

The two main alternative fuel options, outside of diesel, are natural gas and propane.

Natural gas costs less than diesel and propane, and it provides a more environmentally friendly option than diesel.

Propane costs more than both natural gas and diesel, but it runs more efficiently.

Propane also doesn’t release toxic fumes into the air.

 

Storing Gas At Construction Site Safely

 

If you choose to store gas of any kind on the job site, you need to take special precautions to prevent an expensive and potentially dangerous situation.

Follow these rules to store fuel safely:

• Store at room temperature
• Keep away from the elements
• Create distance from any heat sources or open flames
• Tighten container properly
• Place on level floor or shelf

 

Water On Construction Sites

 

Workers must have adequate drinking water available at the job site as well as access to water required throughout the construction process.

 

Drinking Water

 

Most construction jobs take place outside.

In hot climates, this becomes especially dangerous when temperatures reach the point of causing dehydration and heatstroke.

That’s why each construction site must provide adequate drinking water for all employees by law set in place by the National Safety Council.

Many managers will provide bottled water or a water cooler.

However, that doesn’t provide a solution to meet their water needs on a construction site.

 

Temporary Water Options

 

The two main ways to get water to a job site are a fire hydrant, a temporary water line, or a filling station.

A temporary water line costs more and can take up to eight weeks, but it provides a better, long-lasting solution than the other options.

Fire Hydrants work in situations when people can’t wait or must stick to a strict budget.

Filling stations work best when there’s no nearby fire hydrant.

To install and remove a fire hydrant, the cost comes to roughly $180 for a 3” meter and $360 for a larger hydrant.

The rent per month adds on another $60 for a 3” meter and $200 for a larger hydrant.

To install a filling station will cost $90 and $60 in monthly rent.

This does not include the cost of water.

 

Lavatories On Construction Sites

 

Workers need a reasonably sanitary place to go to the bathroom at the job site.

When no other options present themselves, most managers will have portable toilets installed.

One or two portable toilets should accommodate a job with up to 50 people.

For standard options, you can expect to pay $125 to $300 for monthly rental.

For the most high-end models, you can pay up to $500 per month.

 

Estimating Utility Costs

 

Contractors run into a significant number of question marks when attempting to calculate utility expenses for a job.

Ambiguity in contract language can make it impossible.

That’s why it’s best to obtain as much detail as possible.

Furthermore, large jobs may not have an exact end date, affecting the cost.

Nonetheless, contracts need to do their best to accurately estimate how much the job will cost in utilities.

 

Estimating Utility Costs

 

To estimate the utility costs for a project, the contractor will need to examine the job and what the workers will need to get the job done.

The contractor can use this information to estimate the cost based on similar recent jobs.

Contractors can also use software to help them estimate the cost of utilities for each job.

While an upfront expense, the software provides accurate estimates.

 

Types Of Construction Contracts

 

There are different contracts available in construction.

Choosing one contract over another can make a significant difference, especially in regard to moveable costs, such as utilities.

 

Fixed-Price Contracts

 

With a lump-sum contract or a fixed-price contract, the contractor provides one overall price to complete the project.

These contracts work well for well-defined projects that don’t have the potential for expensive surprises.

Fixed-price contracts are the easiest contracts available.

However, they also leave the most room for error.

Contractors who finish under budget end up with high profit margins.

However, if utility expenses go over budget, the contractor will need to absorb the costs.

 

Time And Material Contracts

 

T&M contracts define the costs of the materials and the hourly rate.

These contracts work well when multiple unknown factors can impact the progress of construction as the contractor works.

Contractors tend to benefit from this type of contract as long as they track things properly.

However, this option doesn’t provide much incentive for contractors to use fewer materials or work quickly.

 

Unit Price Contracts

 

Unit price contracts detail the price of tasks in large-scale, repetitive projects.

These contracts detail the cost of various items.

Unit Price Contracts make invoicing simple and keep rates consistent, but the immense amount of work these contracts are used for tends to take a long, long time to pay out.

 

Construction And The Environment

 

Construction has a deep impact on the planet, and not always in a positive way.

While we need construction to build new homes, office buildings, and warehouses, we also need to do our best to acknowledge and minimize our carbon footprint, even at the construction site.

Construction projects make up 25% to 40% of the world’s toxic emissions.

This leads to global warming as well as lowering air quality index (AQI).

Construction also makes up about 50% of the world’s landfills, taking up very valuable space.

These landfills require utilities to operate and emit even more toxins into the air.

Luckily, more and more contractors are deciding to go green and save money on utilities while also reducing their carbon footprint.

 

How To Keep Utility Expenses Low On Construction Site

 

It can benefit both the contractor and the person requesting the work to save as much on utilities while on the job site as possible.

Contractors save money on a cost they take responsibility for, and homeowners appreciate the efforts.

They may even see some of the savings, too, depending on the agreement.

 

Use Energy Efficient Lighting

 

Every construction job needs light.

Instead of opting for inexpensive incandescent lighting, you should buy LED lights.

LED lights use significantly less energy and last longer.

If you can use the light bulbs at the next job site, even better!

 

Finish Job Quickly

 

The longer you stay on the job site, the more utilities you will need.

You may also need to pay additional rental fees.

To save money, work longer hours (according to law) with maximum efficiency, so you can get the job done as quickly as possible.

 

Keep Heating/Cooling Costs Down

 

You need to keep employees reasonably comfortable on the job site.

However, heating and cooling account for the majority of utility expenses in construction.

You can keep costs down by changing the temperature slightly and not using the air conditioner the entire length of the workday.

Try cutting it off a bit early when the sun and its heat go down.

 

Try Solar Power

 

Contract managers can use solar-powered products to help create energy self-sufficiency.

Solar power takes energy from the UV rays of the sun and turns it into electricity.

This works especially well in sunny conditions.

Solar power can cost a lot initially.

It also doesn’t always provide enough electricity for your needs.

Hybrid objects that use standard electricity as a backup can be a great compromise.

 

Final Thoughts On Utility Costs During Construction Projects

 

Construction managers usually take on the cost of the utilities during a construction project and add it into the cost of the total job.

On the job, the costs add up rather quickly, so it’s important to get everything hammered out during the contract stage.

The best contract depends on the type of job, but they all have their advantages and disadvantages.

It can benefit everyone involved to save on utility costs during the job, so encourage everyone to work together to achieve the goal of efficiency and use environmentally friendly options.