Overhead and Profit on Xactimate Water Damage Estimates
Why Xactimate unit prices exclude general contractor O&P, where the 10 and 10 markup lives in the estimate, why WTR line items default to non-O&P, and how to bill job-related overhead as line items instead of losing the argument.
Xactimate unit prices do not include general contractor overhead and profit, and Verisk says so in its own published documentation. O&P is applied separately, either as a percentage in Estimate Parameters or item by item, and water mitigation line items in the WTR category default to non-O&P, which is the most common reason the markup vanishes from a mitigation invoice before an adjuster ever touches it.
What Verisk unit pricing already includes
Verisk's white paper on overhead and profit separates two kinds of overhead, and the distinction decides where the money goes.
General overhead covers expenses a general contractor cannot attribute to any individual project: G&A expenses, office rent, utilities, office supplies, salaries for office personnel, depreciation on office equipment, licenses, and advertising. Verisk excludes these from unit pricing, and contractors surveyed to build a price list are told to leave general overhead and profit out of the numbers they report. It gets added back as a percentage of the total bid alongside the profit margin.
Job-related overhead covers expenses attributable to a project but not to a specific task: project managers, onsite portable offices and restroom facilities, temporary power, temporary fencing, and security. These also sit outside unit pricing, but they do not belong inside the O&P percentage. They go on the estimate as their own line items.
Where the markup lives inside the estimate
The percentage is set in the Estimate Parameters window. The industry convention is 10 percent overhead and 10 percent profit, written as "10 and 10" or "20 percent O&P."
Check whether the estimate is set to cumulative O&P, because the two settings produce different totals. Cumulative calculates overhead against the estimate total, then calculates profit against the total plus the overhead already added. On a $10,000 estimate, non-cumulative produces $12,000. Cumulative produces $1,000 of overhead, then 10 percent of $11,000, for a $12,100 total.
To apply O&P to a single item in Xactimate X1, open the estimate, go to Estimate items > Items, select the line item beneath the Quick entry pane, click the Unit price tab, click the O&P button, and select OK.
WTR category items default to non-O&P. The default can be changed back in the Quick Entry pane of the Estimate Items tab, but nothing on screen announces it was applied, so every mitigation estimate deserves a check of the item list before it goes out.
O&P controls that appear locked or greyed out are usually a carrier setting rather than a software problem. XactAdmin profiles and instances carry their own O&P configuration, including an option to turn off O&P default modification.
The three trade rule and why mitigation invoices lose the markup
The three trade rule holds that O&P applies when a general contractor coordinates three or more distinct trades on a claim. It is an industry convention rather than a Verisk rule. Verisk leaves the amount of overhead and profit, and how and where it is accounted for, to the estimator based on the conditions of the job and the service provider doing the work.
Carriers apply the rule strictly against mitigation. Extraction and structural drying get treated as one trade, one crew, one specialty, so a mitigation-only invoice frequently comes back with the markup stripped. A reconstruction estimate clears three trades once drywall, paint, floor covering, electrical, and plumbing are in the scope.
The argument on a mitigation file is stronger when the work spans separate specialties. Extraction, structural drying, contents handling and pack-out, antimicrobial application under WTR GRM, and selective demolition are distinct scopes of work. Naming them individually in an F9 note, with the crew or subcontractor that performed each, is more persuasive than asserting O&P is owed.
Bill job-related overhead as line items
Supervisory time is recoverable independent of the O&P argument, and it survives review more often because it attaches to documented hours rather than to a percentage. The supervisory labor item (LAB SUPERR in most price lists, billed per hour) covers a supervisor who is on site to supervise. Confirm the description in the current price list, since Verisk updates pricing monthly. Temporary power, fencing, portable restroom facilities, and site security belong on the estimate as separate items for the same reason.
Two sources support the hours. OSHA 1926.20(b)(2) requires employers to designate a competent person to make frequent and regular inspections of job sites, materials, and equipment. The IICRC S500 notes that large projects usually require a higher level of project management or administration. An F9 note citing the specific hazard assessment performed, and the hours it took, gives a reviewer something concrete to approve.
Do not bill supervisory hours for the same clock hours a technician is already billing for equipment setup or monitoring. That is double billing, and finding it gives a reviewer cause to remove the entire supervisory block rather than the overlapping portion.
A working sequence
- Decide at intake whether the file is mitigation only or mitigation plus reconstruction, and write the estimates so the reconstruction scope carries the trade count.
- Count the distinct trades and name them in an F9 note before the estimate goes to the carrier.
- Set the percentages in Estimate Parameters, and confirm the cumulative setting matches the carrier's profile.
- Review the item list for WTR codes that defaulted to non-O&P.
- Move job-related overhead onto the estimate as line items with documented hours.
- Attach the drying log, moisture documentation, and photos, because a stripped markup is often a symptom of a file that could not support the scope.
Frequently Asked Questions
Does Xactimate pricing include overhead and profit?
Xactimate unit prices include the trade contractor's own costs and margin but exclude the general contractor's overhead and profit. Verisk states that general overhead expenses are not included in its unit pricing and are added to the estimate separately as a percentage of the total bid.
Do water mitigation line items get O&P?
WTR category items default to non-O&P in Xactimate, and carriers commonly argue that drying is a single trade. The default can be changed in the Quick Entry pane, and the argument is stronger on files where extraction, drying, contents handling, antimicrobial application, and demolition were coordinated as separate scopes.
What is the three trade rule?
The three trade rule is the industry convention that a general contractor coordinating three or more distinct trades on a claim is entitled to overhead and profit. It is not a Verisk rule, and Verisk leaves the decision to the estimator based on the conditions of the job.
How is supervision billed when the carrier removes O&P?
Supervision is job-related overhead rather than general overhead, so it belongs on the estimate as its own line item (LAB SUPERR in most price lists, billed per hour). Document the hours, cite the inspections performed, and never bill supervisory time that overlaps hours already billed for technician work.
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