Develop winning prices for different contract types while maintaining profitability.
Summary
Pricing Strategy by Contract Type: FFP, T&M, Cost-Plus Develop winning prices for different contract types while maintaining profitability.
Calculate actual or planned salaries for each labor category. Consider where staff will work on the range for their category. Factor in planned salary increases over the contract period.
Include payroll taxes, health insurance, retirement contributions, paid leave, and other employee benefits. Fringe typically ranges from 25-40% of direct labor depending on benefit levels.
Overhead covers indirect costs of performing work including facilities, equipment, supervision, and support staff. Overhead rates vary widely by company type and typically range from 40-120% of direct labor.
General and administrative costs cover corporate functions like executive management, accounting, HR, and business development. G&A typically ranges from 8-20% applied to total costs.
Profit rates on T&M contracts typically range from 7-15% depending on risk, investment, and competitive factors. Profit applies to the total of all costs.