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)

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 Paradigm-360.com, 360 Difference Mac4Construction.com,iOS4Construction.com and now TheBuildingAndRemodelingWiki.com too.
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