Permits, inspections, dumpsters, utility locates — you are probably paying for these out of your own margin. Here is how to price and bill them as pass-through costs.
Every landscape contractor has paid for something that should have been the client's cost. A permit you pulled. A dumpster you rented. A utility locate fee. An inspection you had to reschedule because the client was not ready. These costs are real, they hit your bank account, and in most cases they are not being passed to the client — they are being absorbed into your margin.
Over a full season, unrecovered third-party costs can add up to $8,000 to $20,000 depending on your project volume. That is not a rounding error. That is a truck payment, a crew bonus, or your entire advertising budget for the year — given away for free.
What Counts as a Third-Party Pass-Through Cost
A pass-through cost is any expense you pay on behalf of the client to a third party — a government agency, rental company, utility provider, inspector, or specialist. You are the intermediary. The cost exists because of this specific project. It belongs in the contract price, not in your overhead.
Common pass-through costs in landscape construction:
- Building permits and permit application fees
- Utility locates (paid or free via 811 — the time cost is real even if the service is free)
- Inspection fees and re-inspection fees
- Dumpster or debris removal rental
- Equipment rental (excavator, mini loader, compaction plate not owned)
- Temporary fencing or erosion control materials required by permit
- Soil or material testing required by local code
- Engineered drawings or stamped plans required for permit
- Dewatering or erosion control required by site conditions
- HOA application or review fees
Every item on that list is a legitimate, billable project cost. Not one of them is "overhead" unless you paid for it on a job and did not charge for it.
The Right Way to Handle Pass-Through Costs in Your Proposal
The cleanest approach is to list pass-through costs as their own line item in the estimate, separated from your labor and materials. Label them clearly. Add a handling fee — typically 10 to 15% — on top of the actual cost to cover your administrative time and the risk of cost variance.
Example estimate line items:
- Building permit (estimated at $380, billed at cost + 10%) — $418
- Dumpster rental, 10-yard, 5-day minimum — $290
- Equipment rental — mini excavator, 2 days — $740
- Engineered drainage plan (required by permit) — $1,200
Note the language "estimated at cost" for permit fees — that is intentional. Permit fees can change between estimate submission and permit pull. By flagging this in the proposal, you protect yourself against an increase without a surprise conversation later.
Why Contractors Absorb These Costs (And Why That Logic Is Wrong)
Most contractors absorb third-party costs for one of three reasons: they forget to include them in the estimate, they worry that itemizing will make the proposal look expensive, or they believe the client will push back.
All three concerns are understandable. All three are wrong.
Forgetting is a system problem, not a habit problem. Add a checklist to your estimating process: before you submit any proposal over $10,000, review a list of potential third-party costs for that project type and confirm each is accounted for or excluded in writing.
Clients rarely object to clearly labeled pass-through costs. What clients object to is vague price increases after the contract is signed. A permit fee labeled and estimated in the proposal is expected. A "hey, the permit ended up costing $650 instead of $350, can we add that?" conversation six weeks after signing is friction. Do the work upfront.
"I used to eat permit fees because I thought it made me look cheaper. It just made me work for less. Now every permit, every dumpster, every inspection fee is on the estimate — and not one client has ever walked away over it."
How to Handle Variable Pass-Through Costs That Are Unknown at Bid Time
Sometimes you cannot nail down the exact cost of a pass-through item before sending the proposal. Permit fees vary by jurisdiction, engineered plans can vary by scope, equipment rental rates fluctuate. You have two options.
Option 1: Estimate high and reconcile at close. Include a line item at your best high estimate (e.g., "Building permit — estimated $500, billed at actual cost"). If the actual cost is lower, credit the client. If it is higher, they have already agreed to pay actual cost. This is the most professional approach and creates no surprises.
Option 2: Exclude with written explanation. Write in your proposal: "Permit fees, inspection costs, and engineered plans are not included in this proposal. These costs will be billed at actual cost plus a 10% handling fee upon invoicing." The client is informed, they consent by signing, and you are protected.
Either approach is better than silent absorption. Choose the one that fits your client relationship and document it in the signed proposal.
The Handling Fee Is Not Greedy — It Is Accurate
A 10 to 15% handling fee on pass-through costs is standard in construction contracting. It covers: the time you spend researching and sourcing the service, the administrative cost of paying the invoice and reconciling it, and the risk you carry if the cost runs over before you bill the client.
On a $1,200 engineered drainage plan, a 15% handling fee is $180. That $180 represents real work — calls to engineers, reviewing the drawings, managing revision requests, submitting to the permit office. If you do not charge it, you did that work for free.
See how this connects to your overall job cost structure in the job costing guide.
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Frequently Asked Questions
Can I charge a markup on subcontractor costs?
Yes — and you should. A 10 to 20% markup on subcontractor costs is standard in construction. It covers the coordination time, your liability for their work quality, and the risk you carry if they underperform. Disclose it as a line item if your client relationship is transparent, or build it into your quoted subcontractor price. Either way, do not pass through subcontractor costs at exactly what you paid.
What happens if a permit costs more than I estimated?
If your proposal says 'billed at actual cost' or 'estimated at $X, subject to final permit determination,' you are covered. Issue a revised invoice or a supplemental change order with the actual permit receipt attached. Most clients accept this without pushback when the documentation is clear. The problem only arises when you estimated a fixed amount and now want more than that without written protection.
Should I pay permit fees upfront or have the client pay them directly?
Paying permits and billing back gives you control of the timeline and simplifies the client's experience. Having the client pay directly avoids the float but creates coordination friction — the client may delay, miss deadlines, or pay the wrong amount. Most contractors pay permits and bill them back with the next payment milestone. Include it in your payment schedule so it does not sit open for long.
Is a dumpster rental a pass-through or an overhead cost?
It depends on how you use it. A dumpster rented specifically for a job and billed to that job is a pass-through. A dumpster you keep at your yard and use across many jobs is an overhead cost. The key question: can you tie the cost directly to a specific project? If yes, it is a pass-through. If no, it is overhead — and your overhead rate should reflect it.
What is a handling fee and how do I explain it to clients?
A handling fee (10–15% on pass-through costs) covers your administrative time, risk, and coordination on costs you incur on behalf of the client. You can explain it simply: 'We manage the permit process, pay the fees, coordinate the inspections, and reconcile everything at project close. The handling fee covers that coordination.' Most clients in the $30K+ project range understand this without friction.
Edgar Galindo
Co-founder, Ledge
Edgar built Ledge while running a landscape construction company in Central Texas. He writes about estimating, job costing, and building a business that runs without you on every site.