Stack your indirect rates in the right sequence — fringe, then overhead, then G&A — on top of direct labor, then add fee. Get the sequence or the base wrong and the whole proposal price is off. Solvability’s Wrap Rate Calculator builds this the same way the government evaluates it, sized for a small contractor’s first or fiftieth proposal.
A wrap rate you cannot reproduce will create pricing that is wrong.
The seven steps
Pull actuals from the general ledger
Export a trial balance for the most recent complete fiscal year.
Define your cost pools and bases
Assign every account to direct cost, fringe, overhead or G&A, and decide the base each pool is allocated over. This structure — not the resulting percentage — is what gets examined.
Calculate each indirect rate
Fringe Rate = Fringe Pool ÷ Productive Labor (Direct Labor + Overhead Labor + G&A Labor)Overhead Rate = Overhead Pool ÷ (Direct Labor + Fringe)G&A Rate = G&A Pool ÷ Total Cost InputForward-price the rates
Adjust for known changes in the proposal period: a committed hire, a new lease, a benefits renewal. You are pricing the period of performance, not last year. State each assumption.
Layer the rates onto direct labor
Apply fringe, then overhead, then G&A, then fee — each to its correct base. The wrap rate calculator does this layering for you.
Price-check against the competitive range
If you land far outside the range, find out why before changing anything. Sometimes the answer is that overhead is genuinely too high — a business problem, not a pricing problem.
Document the build
Keep everything together and validate your total wrap on every bid. If you cannot reproduce the rate a year from now, your pricing and your spreadsheets are wrong.
Bidding something soon?
If the proposal is live and the rates have never been built from your books, that is the moment to get it right rather than after award.
Get in touchFrequently asked questions
What is a wrap rate for federal contractors?
Your wrap rate is what it costs you to put an hour of labor on a government contract — not just the direct labor, but fringe, overhead, and G&A stacked on top of it. A wrap rate takes direct labor and applies percentages called burdens to cover indirect costs: fringe covers payroll taxes, leave, and benefits; overhead covers support costs for your technical team; G&A covers corporate expenses. Solvability’s Wrap Rate Calculator walks through these calculations and how to apply them when pricing a cost proposal.
How do I calculate my fringe rate and overhead rate?
Fringe Rate equals total fringe benefits cost divided by productive labor (generally direct labor, overhead labor, and G&A labor combined); that rate then gets applied to direct labor. Overhead Rate is generally Overhead Pool Cost divided by Overhead Base (Direct Labor plus Fringe applied to Direct Labor), though other acceptable methods exist. Get either calculation wrong and the bid price carries the error forward. Solvability’s tools walk a small federal contractor through fringe and overhead separately, so each rate is accurate before it’s combined into a wrap rate with G&A and fee.
How do I price a fixed-price federal contract?
Start with your real wrap rate, not last year’s number, and build the price up from there. For a small federal contractor, pricing a fixed-price contract wrong means absorbing every unplanned cost yourself — once it’s signed, the government pays the agreed price no matter what your actual costs turn out to be. Use budgets and projections to estimate costs, including a management reserve, and make sure you’re bidding higher profit on fixed price to offset the additional risk you’re now carrying as the contractor.
How often should I rebuild my wrap rate?
At least quarterly. Rates drift as headcount, benefits costs and business volume change, and a rate built once a year is already wrong by the time you bid with it. Rebuilding quarterly also means the comparison between what you bid and what actually happened is short enough to be useful.