How GC overhead, profit, and management fees actually work on a Houston remodel — and why the cheapest bid is usually the most expensive one.
In Houston, a general contractor's overhead and profit typically runs 15–25% of construction cost. On a cost-plus contract that fee is stated openly; on a fixed-price contract it is built into one number. A design-build firm folds design, permitting, and construction management into the same contract instead of billing them separately, which usually lands within the same total while removing the gap between drawings and the field.
The three numbers in every bid
Every construction bid is made of hard costs, general conditions, and overhead and profit. Hard costs are materials and trade labor. General conditions are the things that keep a job running — dumpsters, portable toilets, temporary power, protection, supervision, and cleanup — and typically run 6–10% of construction cost on a Houston remodel.
Overhead and profit is the contractor's fee: 15–25% is the honest working range in this market for a managed remodel. Below about 12%, the contractor is either paying themselves nothing or planning to make it up on change orders.
Cost-plus versus fixed-price
Cost-plus means you pay actual invoices plus a stated fee. It is transparent and it works well when scope is genuinely unknown — a fire rebuild, or a 1930s Heights bungalow where nobody knows what is behind the plaster.
Fixed-price means one number for a defined scope. It transfers risk to the contractor, which is exactly what most homeowners want. It only works when design and selections are complete enough to price. A fixed price quoted off a napkin sketch is a fiction that becomes a change order.
Why the low bid is usually the expensive one
When three bids come back at $180,000, $185,000, and $128,000, the outlier is not a bargain — it is a different scope. Nine times out of ten the low bid excludes permits, omits electrical upgrades that code will require, uses allowances set below anything you would actually pick, or assumes subcontractors who are not carrying insurance.
Ask every bidder to price the same written scope with the same allowances. When the scope is identical, the spread between honest contractors is usually under 10%.
What to ask before you sign
Ask who pulls the permit, what the payment schedule is tied to, how change orders are priced and approved, whether allowances are realistic for the finishes you actually want, and who your single point of contact is on site.
Ask for a certificate of insurance issued directly by the carrier, not a PDF forwarded by the contractor, and confirm the subcontractors carry their own coverage. Texas does not license general contractors, so those documents are your protection.
Frequently asked questions
- Is a general contractor worth it for a Houston remodel?
- For anything involving permits, multiple trades, or structural work, yes. The 15–25% fee buys scheduling, code compliance, insurance, warranty, and one accountable party. Owner-managed jobs usually cost more in delays, rework, and change orders than the fee they were trying to avoid.
- How much should I pay up front?
- A deposit of 10–20% to cover mobilization and long-lead ordering is normal. Beyond that, payments should be tied to completed milestones, not to a calendar, and the final payment should be held until punch list and final inspection are done.
- Do general contractors need a license in Texas?
- No — Texas does not license general contractors at the state level. Individual trades are licensed by the state, and some cities require contractor registration to pull permits. Verify insurance, permit history, references, and contract terms instead.
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