Pricing a Federal Proposal: Wrap Rates Explained

One of the most common mistakes new contractors make is underpricing - quoting close to their direct labor cost and forgetting the indirect costs that keep the business running. The fix is understanding your wrap rate.

The cost buildup

A fully-burdened (wrapped) labor rate stacks several layers on top of the base hourly rate you pay an employee:

• Fringe: benefits, payroll taxes, and leave, applied to direct labor.
• Overhead: costs of running the delivery side of the business, applied to labor + fringe.
• G&A: general and administrative costs, applied to the running total.
• Fee: your profit, applied to the fully-burdened cost.

Why it matters

If you bid without covering indirect costs, you can win the work and still lose money. If your rates are too high, you price yourself out. Knowing your approved indirect rates lets you bid competitively and profitably.

Use the free wrap rate calculator to model your fully-burdened rate from a base rate and your indirect percentages.