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materials. In general, petitioner subcontracted for certain
parts of projects, such as electrical work, asphalt, or
landscaping.
Bids
Petitioner’s work was generally obtained through competitive
bids. Petitioner’s bids comprised costs for labor, equipment,
and materials. In computing its bid, petitioner estimated the
cost of labor and equipment and added a markup to the cost of
labor. Further, petitioner estimated the quantity of materials,
which could include concrete, aggregate (stone and gravel),
reinforcing steel, piping for sewer and drainage, guardrail, etc.
However, petitioner did not add a markup to the cost of materials
but rather included the cost of the materials, as quoted by the
supplier, as an item in the bid. During the year in issue, 27
percent of petitioner’s gross revenue came from the material cost
of concrete. Petitioner would always solicit materials costs
from at least two suppliers, and sometimes three or four, and
would choose the lowest quoted cost for use in the bid. The cost
of materials was subject to slight variations due, for example,
to the distance between a supplier and the job site. However,
petitioner got a discount for early payment to suppliers, which
was not passed along to customers. Occasionally a customer
itself would supply materials (e.g., concrete), but this did not
happen during the year in issue.
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Last modified: May 25, 2011