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)

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J. Jerrald Hayes
I am ex-architectural woodworker and general contractor turned IT, Business and Project Management consultant, software developer wannabe senior division triathlete and ski racer, Yankee fan and founder of, 360 Difference, and now too.
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