Material costs are increased by a predetermined percent to recover indirect G&A (general and administrative) overhead costs on materials. Direct labor costs are increased by another predetermined percent to recover indirect G&A costs on labor. Equipment costs, other than rental equipment, are usually included in the indirect G&A overhead mark-up percents. Sales tax and labor burden is usually calculated in the respective mark-up percents. Subcontractors are normally marked up independent of the other direct costs. Net profit may be included in the mark-up percents or it may be added at the end of the bid. The mathematical formula is as follows:
((material costs X P1) + (direct labor costs X P2)) = Price
see also Multiple Overhead Recovery System (MORS)
