Wrap rate calculator

Turn a salary rate into the fully burdened hourly price you can defend in a federal proposal, with each indirect pool applied in the right order.

Direct labour rate

Hourly, unburdened.

Fringe

On direct labour.

Overhead

On labour plus fringe.

G&A

On the running subtotal.

Fee

On total cost.

Fully burdened rate

Wrap rate

2.26x

Billing $113.02 per hour on a $50.00 salary rate.

Direct labour: $50.00
Fringe: $15.00
Labour plus fringe: $65.00
Overhead: $26.00
Subtotal: $91.00
G&A: $13.65
Total cost: $104.65
Fee: $8.37
Price per hour: $113.02

This models the standard indirect buildup. Your actual rates depend on your approved or proposed indirect structure and your accounting system, and a cost proposal may be audited against them. Use this to sanity-check a number, not to replace your accountant.

Sources

A wrap rate is the multiplier between what you pay someone per hour and what you bill for that hour. It exists because a proposal has to recover more than salary: benefits, the cost of running an office, the cost of running a company, and a profit. The arithmetic is simple but the order matters, and getting the order wrong is what produces a rate that looks competitive and loses money.

The pools compound, they do not add

Thirty and thirty is not sixty.

Each pool applies to the running subtotal, not to the base salary. Fringe applies to direct labour. Overhead applies to labour plus fringe. G&A applies to everything above it. Fee applies to total cost.

That compounding is why a 30 percent overhead and a 30 percent G&A produce a 1.69 multiplier rather than 1.60. On a large services bid that difference is the whole margin, and estimators who add the percentages together underprice consistently without ever seeing why.

Fringe on direct labour
Overhead on labour plus fringe
G&A on the running subtotal
Fee on total cost

What belongs in each pool

The split has to match how your accounting system actually works.

Fringe covers the cost of employing someone beyond their wage: payroll taxes, health coverage, retirement contributions, paid leave. Overhead covers the cost of the operation those people work in, such as facilities, supervision, and tools attributable to a delivery organisation. G&A covers the cost of running the company as a whole: executive time, finance, legal, business development.

The boundaries are not a matter of taste. Where costs sit determines your rates, your competitiveness on different work, and whether an audit agrees with your proposal. A company bidding both on-site and remote work often needs more than one overhead pool, because loading a remote engagement with facility costs it does not consume makes it uncompetitive.

Unallowable costs are a separate matter. Some expenses cannot be recovered on a federal contract at all and have to be excluded from the pools before rates are computed.

Fee is not the same as margin

The profit line is the smallest lever you have.

Fee sits on top of total cost and is often constrained, by the contract type, by what the competition will bid, or by statutory limits on certain work. Because it is applied last and is usually a single-digit percentage, it is a weak lever compared with the indirect rates underneath it.

Companies that find themselves uncompetitive usually cannot fix it by cutting fee. The fix is in the indirect structure, in the labour mix, or in bidding work that fits the cost structure they have.

Using the rate in a proposal

The number needs a basis, not just a value.

A price volume is evaluated for realism as well as level. An unexplained low rate reads as a misunderstanding of the requirement and can cost technical points or the award. Show what the rate is built from, state the assumptions, and make sure the staffing in the price matches the staffing described in the technical response.

Keep the rate consistent with what your accounting system will actually record. A proposal built on rates the system cannot produce creates a problem at incurred cost submission that is far more expensive than losing the bid would have been.

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Related resources

Labour cost-to-bid calculator

Apply the wrap rate across categories and hours to price the whole estimate.

Evaluation score simulator

See how a price change moves your combined score.

FAR basics

Part 31 cost principles and where allowability is decided.

Writing a winning bid

Making the price volume and the technical volume tell the same story.

Questions people ask

What is a wrap rate?

The multiplier between an employee's unburdened hourly rate and the hourly price you bill. A 2.2 wrap on a 50 dollar salary rate gives a 110 dollar billing rate, covering fringe, overhead, G&A, and fee.

What is a typical wrap rate in government contracting?

Services companies commonly land somewhere between about 1.5 and 3.0 depending on whether work is on-site or at their own facility, how heavy their indirect structure is, and the contract type. There is no correct figure: the right one is the one your accounting system supports.

Why is 30 percent overhead plus 30 percent G&A not 60 percent?

Because G&A applies to the subtotal that already includes overhead. The pools compound, giving 1.3 times 1.3, or 1.69, rather than 1.60. Adding the percentages underprices the work.

Can you lower a wrap rate to win?

Only by changing the underlying structure, not by asserting a lower number. Rates have to match what your accounting system records, and a proposal built on rates you cannot support creates an audit problem later that is worse than losing the bid.