How to Price Excavation Work: Machine Hours, Mobilization and Bidding a Small Job

Most advice on pricing excavation is written for contractors who bid site work off engineered plans with an estimating department behind them. A small rural outfit with an excavator, a skid steer and a dump truck has a different problem. You are pricing driveways, ponds, septic digs, footers for the builder you work with every spring and the culvert that washed out on somebody's lane, usually from a short site visit and a phone call.

This guide gives you a method for that. It works from your own numbers, so the price it produces is one the business can survive on, and it treats builder work and homeowner work separately because they are bought differently. It is the pricing side of excavation marketing for a rural company.

Step one: know what each machine costs per hour

Iron is the business. It costs money every month whether it moves dirt or not, so the first number you need is what an hour of each machine actually costs you.

For each machine, add up a full year of:

• Ownership. The payment, or the purchase price spread over the years you expect to keep it, less what you expect to sell it for.
• Insurance and registration for the machine and anything that hauls it.
• Fuel and fluids.
• Repairs and wear parts. Undercarriage, tracks, teeth, cutting edges, hoses, filters. Use what you really spent, not what the dealer said it would cost.
• Storage, shop time and the tools that keep it running.

Divide that by the hours the machine was actually billed on a job last year, not the hours it could have run. A machine that is billed half the hours you planned costs twice as much per billed hour as you think. That is why the utilization number in the marketing guide matters so much: it is the denominator of every price you give.

Step two: add the operator and the overhead

The machine rate does not include the person in the seat. Add the operator's wage plus taxes, workers' compensation and anything else that comes with each hour, and include a fair wage for yourself when you run the machine.

Then spread the overhead that belongs to no single job: the pickup, the phone, the accountant, liability insurance, the office hours spent on estimates and invoices, the days lost to weather. Add it to the hourly rates in proportion to how much each machine works. The result is an owning and operating rate with operator for each machine and truck. It is break even, and it is the base for everything that follows.

Step three: add the profit the business needs

Break even cannot replace an excavator. Decide what margin the business needs on top of cost to replace iron when it wears out, carry a wet spring and grow. That margin is a business decision, not a rule from someone else's trade. Your break even rate plus that margin is your target rate for each machine. Customers do not see it. You use it to build every bid.

Step four: build each bid from hours, not from a guess

For each job, walk it or have it described well enough to estimate:

• Hours per machine. Digging, loading, spreading, backfill, compaction and finish grading, each with the machine that will do it.
• Truck hours. Hauling spoil out or stone in, counted round trip, with the time to load and dump.
• Mobilization. Loading the machine, the haul there and back, unloading, and any oversize permit. On a small job this can be a large part of the price, so never leave it out.
• Materials. Stone, pipe, fabric, fill, topsoil, at cost plus a handling margin.
• Disposal. What it costs to get rid of spoil, stumps, concrete or anything else that cannot stay on site.
• Cleanup and restoration. Putting topsoil back, raking, seeding if you promised it, cleaning the road.

Multiply each set of hours by its target rate, add materials, disposal and restoration, and you have the price. As a made-up illustration (use your own figures): a driveway that needs a day of excavator time, half a day of skid steer, a few truckloads of stone and one move of each machine is priced as those hours at those rates, plus the stone, plus both moves, not as a round number that felt right on the phone.

Then set a minimum charge for any job that needs a machine moved. A two hour job still costs the load, the haul and the unload.

Step five: name the risk instead of padding for it

Dirt hides things. Rock, a high water table, an old tank, a buried slab, soil too soft to build on. You can either pad every bid to cover what might be down there, which loses jobs, or write the assumption into the bid and price the unknown separately.

A bid that says "assumes normal digging conditions; rock removal, dewatering and removal of unsuitable soil billed at the rates below if encountered" does three things. It keeps the base price honest, it tells the customer you know what can go wrong, and it ends the argument before it starts. Builders read that as experience. Homeowners read it as fairness, provided you explain it to them in plain words before they sign.

Builder work and homeowner work are priced differently

They are different customers buying different things, and the bid should show it.

Builders and general contractors buy reliability and schedule. They compare your number with others, but they also know what a sub who slips costs them. Give them a clear scope, a price per item they can check, and the date you can start. A builder who hands you steady work through a season is worth a sharper rate than a one off job, because your machines stay busy and you do not pay mobilization and estimating time over and over. That is a reason to price their work tighter, not a reason to price it below cost.

Homeowners and farms buy trust. They cannot judge grade work and they usually do not know what dirt work should cost. A single price with a short plain list of what is included, what is not, and what happens if you hit rock tends to work better than an itemized sheet. Expect to spend more time per job explaining, and price that time in.

Township and municipal work is priced to its own specification and paperwork, often with bonding requirements, and it pays on its own schedule. Know those costs before you bid, as covered in the rural excavation marketing guide.

Check against the local market, last

Once your number is built, compare it with what the work goes for in your county. You can learn a lot from builders who will tell you, honestly, why another outfit got a job, and from homeowners who show you an earlier quote.

• If you are far below the market, you are leaving money behind or your costs are genuinely lower. Either way there is room.
• If you are far above it, look at utilization and mobilization before you cut the rate. An outfit whose machines sit idle half the season has a high cost per billed hour, and the fix is more steady work, not a lower price.

Check the bid against what the job cost

The best pricing tool a small outfit has is its own records. After each job, write down the machine and truck hours it actually took next to the hours you bid. After a season you will know which kinds of jobs you consistently underestimate (it is usually small jobs and anything involving water) and you can correct the next bid instead of the next year.

When and how to raise your prices

Review your machine rates every winter with the past year's real costs and billed hours. Signs you are too cheap:

• Your machines are booked weeks out and builders wait for you.
• You win almost every bid you give.
• Fuel, insurance, repairs or the price of the next machine went up and your rates did not.

Tell your regular builders your new rates in writing before the season, with the reason in one sentence. The ones who value showing up on time will stay. Our post on raising prices in a small-town business covers how to word it. The excavation marketing plan puts the rate review in December and the letter to builders in January, so the new number arrives before anyone plans around the old one.

Prices on your website

Most excavation work cannot be priced from a form, so do not pretend it can. What the website can do is say what you do, where you work, that you are insured, and that you give written bids with the assumptions stated, which is the kind of thing a careful customer wants to see before calling. There is more on that in the excavation website template checklist, and on the general question in should I put prices on my website.