On a services bid, your price is mostly labor — and your labor price is your wrap rate at work. Understand it and you can price to win without losing money; ignore it and you’ll either bid too high to compete or too low to survive. Here’s how it works.

What a wrap rate is

A wrap rate (or fully-burdened rate factor) is the multiplier you apply to an employee’s base labor cost to get the rate you actually bill the government:

Base labor rate × wrap rate = fully-burdened billing rate.

If an engineer’s base rate is $50/hour and your wrap rate is 2.0, you bill $100/hour. The “wrap” is everything layered on top of raw salary to run the business and make a profit.

What’s in the wrap

The multiplier bundles your indirect rates plus fee, typically in these layers:

  • Direct labor — the base salary/hourly cost (this is what gets wrapped).
  • Fringe — benefits: payroll taxes, health insurance, PTO, retirement.
  • Overhead (OH) — costs of the operation that supports direct work (facilities, tools, direct-project management).
  • G&A (General & Administrative) — company-wide costs (executives, accounting, business development).
  • Fee/Profit — your margin.

Conceptually the fully-burdened rate builds up like: base × (1 + fringe) × (1 + overhead) × (1 + G&A) × (1 + fee) — the exact stacking depends on your accounting structure.

Onsite vs offsite

Where the work happens changes the rate. Work performed at a government site usually carries lower overhead (the government provides the facility), so onsite wrap rates are typically lower than offsite rates (work at your own facility). Many proposals require separate onsite and offsite rates for the same labor category.

Why the number is strategic

  • Too high and you lose on price — especially on lowest-price-technically-acceptable buys.
  • Too low and you win work that loses money or can’t be sustained.
  • Your wrap is largely driven by your indirect rate structure, so controlling indirect costs is how you get competitive without cutting salaries or fee to the bone.

Common services wrap rates often land somewhere in the ~1.5x–2.3x range, but this varies enormously by company, cost structure, and whether you’re the prime or a sub — treat any benchmark as a sanity check, not a target.

How to build a competitive one

  • Know your real indirect rates. Build them from your actual accounting; if you’ll deal with DCAA, your structure must hold up to audit.
  • Bid to win, price to survive. Use price-to-win research to find the competitive range, then check your wrap can meet it profitably.
  • Manage indirects and use teaming. A lean cost structure — and, where it helps, teaming with a partner whose rates fit the work — keeps you competitive.
  • Separate onsite/offsite rates when the solicitation asks for them.

The bottom line

Your wrap rate converts salaries into billing rates by stacking fringe, overhead, G&A, and fee onto base labor — and it’s the lever that decides your competitiveness on services bids. Build it from real numbers, control your indirects, price to the competitive range you researched, and keep it profitable. That’s how you win on price without regretting it after award.

This article is general information, not legal advice or accounting advice. Cost and pricing structures must comply with the applicable regulations — consult a qualified government-contract accountant for your situation.