Short answer
The Rate & Pricing Model, or RPM, is the working model Solvability builds for a federal contractor: indirect pools and bases defined from actuals, rates built from them, and a wrap rate that can be reproduced a year later. This demo runs the whole build on a fictional 29-person, $5.7M contractor so you can see what each decision does to the bid rate — including what a three-point swing in G&A costs on a single contract.
What the demo shows
It works through a complete indirect rate build-up on a company that does not exist, with numbers that behave the way real ones do:
- The pools. Which costs sit in fringe, which in overhead, which in G&A — and the judgment calls that decide the borderline ones.
- The bases. Fringe over productive labor. Overhead over direct labor plus fringe. G&A over total cost input.
- Labor utilization. How much of an employee’s paid year is actually billable, and what that does to every rate underneath it.
- The wrap rate stack. The layers applied in order, not added together, ending in a rate you could put on a bid.
- The sensitivity. What happens to the same contract when one rate comes in higher than planned.
The number worth staying for. A G&A rate three points higher than the one you priced with can remove roughly $50,000 of expected profit on a single $2M contract. Nothing about the work changed. The rate did.
Why a fictional company
Because a real one would be unrecognizable after the details were scrubbed, and the point of the exercise is to watch the mechanics rather than to study a case. The 29 people, the $5.7M and the cost structure are constructed to be ordinary — a company small enough that one rate decision matters and large enough to have all three pools.
Run the demo
Example Company
Solvability Systems Corporation
A fictional federal IT services contractor used to demonstrate the RPM. Every number below comes from a real model structure — the same structure built for actual clients.
Solvability Systems Corporation
SSC · Federal IT & Cybersecurity Services
29 Employees$5.7M Revenue7 Active ContractsCost Plus · T&M · Fixed Price
EXAMPLE MODEL
Indirect Rates
Where your wrap rate comes from
These three rates — calculated from your actual Profit & Loss — are the inputs that drive everything else. Most contractors guess. The RPM calculates.
Fringe Rate
21.58%
Benefits, payroll taxes, leave — applied to direct labor
Overhead Rate
2.00%
Technical support costs applied to direct labor + fringe
G&A Rate
12.00%
Executive, accounting, legal — applied to total cost base
Wrap Rate Stack
Built on $1.00 of direct labor
Every layer stacks on the one before it. Miss one and you’re losing money on every hour you bill.
LayerRateAmount
Direct Labor Base
—
1.0000
Fringe Layer 2
21.58%
0.2158
Overhead Layer 3
2.00%
0.0243
G&A Layer 4
12.00%
0.1488
Fully Burdened Labor Cost
—
1.3889
Fee Layer 5
8.00%
0.1111
Wrap Rate Multiplier
—
1.5000
What this means for pricing: An employee earning $50/hr should bill at $75.00. Know your candidate’s pay rate and you know instantly whether you can afford them on this contract — before you make the offer.
Statement of Indirect Expenses
Where the rates actually come from
The indirect rates above are not guesses or industry averages. They are calculated directly from SSC’s Profit & Loss — pool divided by base, every time.
Fringe Pool
PTO & Holiday$343,616
Social Security$292,640
Group Health$220,200
Medicare$68,440
Other Fringe$1,932
Pool Total$926,829
Base (Productive Labor)$4,295,200
Rate21.58%
Overhead Pool
OH Labor$64,800
Recruiting$12,000
Training$600
Software$600
Other OH$15,435
Pool Total$93,435
Base (DL + Fringe)$4,661,978
Rate2.00%
G&A Pool
G&A Labor$395,850
Professional Fees$48,000
Software$24,000
Taxes & Licenses$13,800
Other G&A$93,721
Pool Total$575,371
Base (Total Cost)$4,793,093
Rate12.00%
Labor Utilization
Every employee. Every hour. Every dollar.
The RPM maps every employee to how their time is charged — direct, overhead, or G&A. This is what drives the indirect rate calculation and determines your true cost structure.
| Employee / Title | Annual Salary | Pay Rate | Bill Rate | Charging |
|---|---|---|---|---|
| Davidson, H. · CEO | $185,000 | $88.94 | — | G&A |
| Suzuki, T. · Senior Engineer | $180,000 | $86.54 | $129.81 | Direct |
| Yamaha, K. · Senior DBA | $180,000 | $86.54 | $129.81 | Direct |
| Ferrari, B. · Project Manager | $180,000 | $86.54 | $129.81 | Direct OH |
| Bugatti, R. · Senior Analyst | $110,000 | $52.88 | $79.32 | Direct |
| Bentley, P. · Engineer/Scientist | $110,000 | $52.88 | $79.32 | Direct |
| Mercedes, M. · Software Engineer | $110,000 | $52.88 | $79.32 | Direct |
| Lotus, F. · Database Specialist | $110,000 | $52.88 | $79.32 | Direct |
| Delorean, B. · Technical Editor | $100,000 | $48.08 | $72.12 | Direct |
| Lexus, G. · Software Engineer | $125,000 | $60.10 | $90.15 | Direct |
| Tesla, N. · Software Engineer | $125,000 | $60.10 | $90.15 | Direct |
| Porsche, A. · Software Engineer | $130,000 | $62.50 | $93.75 | Direct |
| Fiat, L. · Software Engineer | $135,000 | $64.90 | $97.35 | Direct |
| Saab, K. · Technician | $75,000 | $36.06 | $54.09 | Direct |
| Total (14 shown of 29) | $1,875,000 | — | — | — |
Bill rates calculated at 1.50 multiplier · 80.1% labor utilization · 29 total employees · $393,333 monthly payroll
Why This Matters
You thought your G&A was 12%. It was actually 15%. That 3-point difference costs $50,000.
On a $2M fixed price contract with 60% direct labor, a G&A rate that’s 3 points higher than you thought pushes your wrap rate from 1.50 to 1.54 — and $50,000 in unrecovered indirect costs comes straight out of your profit before you deliver a single hour of work.
Contract Value
$2,000,000
Fixed price · 60% direct labor
Intended Fee at 10%
$200,000
What you planned to make
Unrecovered Indirect Costs
$50,000
G&A was 15% — not 12% — wrap rate was 1.54 not 1.50
Fee Remaining
$150,000
25% of your intended profit disappeared
Most contractors can’t answer the question “What is your G&A rate?” — and that’s exactly the problem. The rate is running in your business whether you know it or not. The RPM tells you the number before you bid, not after you’ve already lost the profit.
Your Next Step
Your RPM is a custom build. Not a template.
What you just saw is an example. Your RPM uses your chart of accounts, your employees, your contracts, and your actual indirect rates — calculated from your real P&L. The result is a model that tells you exactly what to charge on every proposal you submit.Set Up a Discovery Call →
Jenny W. Clark · The GovCon CFO · solvability.com · jenny@solvability.com · 256-882-6276
© 2026 Solvability · Rate & Pricing Model is proprietary methodology · Example data is fictional · RPM Example v2
Want this built on your actual numbers?
The demo is the same model Solvability builds for clients, run on invented figures. Built on yours, it produces the rates you bid with.See how the work runs
Frequently asked questions
What is a Rate and Pricing Model?
It is a working financial model that turns a contractor’s actual costs into the indirect rates and wrap rate used to price federal work. It defines the pools and bases, builds each rate from a trial balance, layers them into a bid rate, and stays reproducible so the same rate can be explained a year later.
How much can an indirect rate error actually cost?
More than most contractors expect, because indirect rates multiply. A three-point miss on G&A can remove around $50,000 of expected profit on a single $2M contract, and on a fixed-price award there is no settlement that gives it back.
Is this the same as a wrap rate calculator?
No. A wrap rate calculator takes rates you already have and layers them. The Rate and Pricing Model is the step before that — it builds the rates themselves from your books, which is where most of the error actually lives.
The Rate & Pricing Model, or RPM, is the working model Solvability builds for a federal contractor: indirect pools and bases defined from actuals, rates built from them, and a wrap rate that can be reproduced a year later. This demo runs the whole build on a fictional 29-person, $5.7M contractor so you can see what each decision does to the bid rate — including what a three-point swing in G&A costs on a single contract.
What the demo shows
It works through a complete indirect rate build-up on a company that does not exist, with numbers that behave the way real ones do:
- The pools. Which costs sit in fringe, which in overhead, which in G&A — and the judgment calls that decide the borderline ones.
- The bases. Fringe over productive labor. Overhead over direct labor plus fringe. G&A over total cost input.
- Labor utilization. How much of an employee’s paid year is actually billable, and what that does to every rate underneath it.
- The wrap rate stack. The layers applied in order, not added together, ending in a rate you could put on a bid.
- The sensitivity. What happens to the same contract when one rate comes in higher than planned.
Why a fictional company
Because a real one would be unrecognizable after the details were scrubbed, and the point of the exercise is to watch the mechanics rather than to study a case. The 29 people, the $5.7M and the cost structure are constructed to be ordinary — a company small enough that one rate decision matters and large enough to have all three pools.
Run the demo
Example Company
Solvability Systems Corporation
A fictional federal IT services contractor used to demonstrate the RPM. Every number below comes from a real model structure — the same structure built for actual clients.
Indirect Rates
Where your wrap rate comes from
These three rates — calculated from your actual Profit & Loss — are the inputs that drive everything else. Most contractors guess. The RPM calculates.
Wrap Rate Stack
Built on $1.00 of direct labor
Every layer stacks on the one before it. Miss one and you’re losing money on every hour you bill.
Statement of Indirect Expenses
Where the rates actually come from
The indirect rates above are not guesses or industry averages. They are calculated directly from SSC’s Profit & Loss — pool divided by base, every time.
Labor Utilization
Every employee. Every hour. Every dollar.
The RPM maps every employee to how their time is charged — direct, overhead, or G&A. This is what drives the indirect rate calculation and determines your true cost structure.
| Employee / Title | Annual Salary | Pay Rate | Bill Rate | Charging |
|---|---|---|---|---|
| Davidson, H. · CEO | $185,000 | $88.94 | — | G&A |
| Suzuki, T. · Senior Engineer | $180,000 | $86.54 | $129.81 | Direct |
| Yamaha, K. · Senior DBA | $180,000 | $86.54 | $129.81 | Direct |
| Ferrari, B. · Project Manager | $180,000 | $86.54 | $129.81 | Direct OH |
| Bugatti, R. · Senior Analyst | $110,000 | $52.88 | $79.32 | Direct |
| Bentley, P. · Engineer/Scientist | $110,000 | $52.88 | $79.32 | Direct |
| Mercedes, M. · Software Engineer | $110,000 | $52.88 | $79.32 | Direct |
| Lotus, F. · Database Specialist | $110,000 | $52.88 | $79.32 | Direct |
| Delorean, B. · Technical Editor | $100,000 | $48.08 | $72.12 | Direct |
| Lexus, G. · Software Engineer | $125,000 | $60.10 | $90.15 | Direct |
| Tesla, N. · Software Engineer | $125,000 | $60.10 | $90.15 | Direct |
| Porsche, A. · Software Engineer | $130,000 | $62.50 | $93.75 | Direct |
| Fiat, L. · Software Engineer | $135,000 | $64.90 | $97.35 | Direct |
| Saab, K. · Technician | $75,000 | $36.06 | $54.09 | Direct |
| Total (14 shown of 29) | $1,875,000 | — | — | — |
Bill rates calculated at 1.50 multiplier · 80.1% labor utilization · 29 total employees · $393,333 monthly payroll
Why This Matters
You thought your G&A was 12%. It was actually 15%. That 3-point difference costs $50,000.
On a $2M fixed price contract with 60% direct labor, a G&A rate that’s 3 points higher than you thought pushes your wrap rate from 1.50 to 1.54 — and $50,000 in unrecovered indirect costs comes straight out of your profit before you deliver a single hour of work.
Your Next Step
Your RPM is a custom build. Not a template.
What you just saw is an example. Your RPM uses your chart of accounts, your employees, your contracts, and your actual indirect rates — calculated from your real P&L. The result is a model that tells you exactly what to charge on every proposal you submit.
Set Up a Discovery Call →Jenny W. Clark · The GovCon CFO · solvability.com · jenny@solvability.com · 256-882-6276
Want this built on your actual numbers?
The demo is the same model Solvability builds for clients, run on invented figures. Built on yours, it produces the rates you bid with.
See how the work runsFrequently asked questions
What is a Rate and Pricing Model?
It is a working financial model that turns a contractor’s actual costs into the indirect rates and wrap rate used to price federal work. It defines the pools and bases, builds each rate from a trial balance, layers them into a bid rate, and stays reproducible so the same rate can be explained a year later.
How much can an indirect rate error actually cost?
More than most contractors expect, because indirect rates multiply. A three-point miss on G&A can remove around $50,000 of expected profit on a single $2M contract, and on a fixed-price award there is no settlement that gives it back.
Is this the same as a wrap rate calculator?
No. A wrap rate calculator takes rates you already have and layers them. The Rate and Pricing Model is the step before that — it builds the rates themselves from your books, which is where most of the error actually lives.