How we calculate true cost.
Every price on TheFatBook is built, not guessed. We start from a bill of materials, add the real local wage, adjust the materials for current inflation, fold in the actual permit fee, then apply a contractor's overhead. No surveys, no "get three quotes and average them," no scraped numbers we cannot trace back to a source. Here is the whole chain, in order.
Cost-index version: 2026-07-10
Update cadence: source review before each published refresh; pages last updated Jul 2026
Primary sources: BLS OEWS wages, FRED Producer Price Index, Craftsman National Estimator, NAHB Cost of Doing Business, city permit fee schedules
Cost index author: David Olson
Methodology reviewer: Leonard "Chuck" Thompson, LC Thompson Construction Co.
01The labor number
Labor starts with the Craftsman National Estimator (the 2026 National Home Improvement Estimator, 22nd edition, ISBN 978-1-57218-410-7, published September 2025). Craftsman publishes the man-hours a trade actually books for a defined task: so many hours to set a 50-gallon water heater, so many to hang and finish a square of drywall. We take those hours and multiply by the local wage.
The wage comes from the BLS Occupational Employment and Wage Statistics. Each metro maps to its OEWS metropolitan area code, and we pull the median hourly wage for the exact occupation that does the work: plumbers under SOC 47-2152, painters under 47-2141, and so on, straight from the OEWS bulk files. A Chicago plumber and a Phoenix plumber do not earn the same, and the index says so.
Then we load the wage. A contractor pays well past the sticker rate: payroll taxes, workers' comp, unemployment insurance, benefits. We use the BLS Employer Costs for Employee Compensation figure for construction, about 37 to 44 percent on top of base pay depending on the trade. Labor is hours times the loaded wage. That is the first line.
02Materials
Materials begin at Craftsman's book price for the same task, then get pulled to current with a Producer Price Index series from FRED. There is no blanket inflation number. Each material category tracks its own series, so ready-mix concrete, softwood lumber, copper, architectural coatings, and mechanical inputs all move independently. If lumber spikes and copper holds, the deck price moves and the repipe price sits still. Materials pass through at cost. They carry no overhead and no margin.
03Permits
Permit fees come from our own dataset, the one that also powers PermitCalculator.com, compiled by hand from published municipal fee schedules. For each city we store the real building, electrical, plumbing, and mechanical fees, and the exemptions. The exemptions matter. Chicago, for one, exempts an in-kind water heater swap from any permit, so the permit line on a Chicago water heater reads $0, and that is correct rather than missing. When a scope does need a permit, we add the city's actual fee for that scope.
04Overhead, cost to deliver, and the lowest realistic price
Direct cost is labor plus materials plus permit. On top of that sits overhead: office, insurance, trucks, software, the cost of running a business that every job has to help carry. Overhead is a percent of revenue, the way the NAHB Cost of Doing Business study measures it, and we set it per trade instead of using one rate for all of them. An HVAC install carries about 24 percent, plumbing close to the same, roofing and kitchen and bath near 23, painting closer to 17. Equipment-heavy work carries less overhead per dollar than labor-heavy service work, and the math reflects that.
Direct cost plus overhead is the cost to deliver: what a licensed, qualified contractor spends to do the job and keep the lights on, before a single dollar of profit. It is the break-even, the red line on every bid gauge, and you should never expect a real business to dip below it. A fair bid sits in a band above it: the floor runs 8 to 14 percent over cost to deliver and the ceiling 24 to 45, floating by trade and market, with most bids landing between 18 and 28. That is the normal working margin an established trade earns. The lowest realistic price, the number we formally call the fair-range price floor, is that break-even plus the leanest margin a crew can sustain, 8 to 14 percent depending on trade and market. It is modeled, not an observed bid: the lowest price an efficient crew can profitably quote. The contractor margin we show is just where the typical quote lands inside or above that band.
05Regional adjustment
National figures use national wages and national material prices. Metro figures keep the real BLS wage for that city, hold materials at national pricing (a sheet of plywood costs about the same in Atlanta as in Denver), then scale the overhead-and-profit markup by a regional factor anchored to the Department of Defense Area Cost Factors, a public construction-cost index. High-wage metros like Chicago land above national. Several Sun Belt metros land at or a little below it. We would rather show a Sun Belt market near 0.9 and mean it than inflate the number to look dramatic.
Who checks it
The pricing methodology is reviewed by Leonard "Chuck" Thompson, a retired high-end residential and commercial builder from Jefferson City, Missouri, who ran LC Thompson Construction Co. for decades. He reviews the method itself: the cost ranges, the lowest-price logic, the regional adjustments, the markup math, the material benchmarks, from the seat of someone who priced and built this work for a living. He is paid a flat consulting rate, with no equity, no referral cut, and no relationship with any contractor, supplier, or data source we publish. His last methodology review was July 2026. He signs off on the method, not on every individual city page or calculator output.
What this is, and what it is not
This is a modeled, source-verified estimate of what a job costs to deliver in your market. It is not a binding quote, and it is not scraped from a pile of invoices. It is modeled line by line from sources you can go check yourself: BLS, FRED, Craftsman, NAHB, and city fee schedules. Use it to tell whether a bid is fair before you sign. Then get it in writing from a licensed contractor.
Using our charts and data
Our cost charts and figures are free to republish. Use any chart or number from TheFatBook in an article, report, or presentation at no cost, as long as you credit "TheFatBook Cost Index" and link back to the page you took it from. That link is the only thing we ask in return. For commercial licensing, bulk data access, or a white-label version of the index, reach us through the about page.