Commercial General Contractor Pricing: How GCs Set Markup
GC pricing is more nuanced than 'cost plus 10%.' Understanding how GCs actually structure their fee, general conditions, contingency, and risk loading helps both contractors price accurately and owners read bids intelligently.
Direct cost: subs, materials, self-perform
The base of every bid is the direct cost of construction — sub quotes, material packages, and self-performed labor and equipment. This typically represents 80–88% of the total bid.
General conditions (GCs)
Site supervision, project management, temporary utilities, dumpsters, safety, and project-specific overhead. Typically 6–10% depending on project duration and complexity.
General requirements
Bonds (1–2% of contract), insurance (1–2%), permits, project signage, as-builts, closeout. Often bundled into GCs but worth tracking separately.
Contingency and fee
Contingency is for known-unknowns (3–5%); fee is profit and home-office overhead (typically 3–8% for hard-bid, 5–12% for negotiated work).
Risk loading
Estimators add risk markup for schedule pressure, design completeness, owner reputation, and labor market tightness. A negotiated TI with a friendly developer might run at fee; a hard-bid public job with tight schedule and stiff LDs deserves more.
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Frequently asked questions
What's a typical GC fee on commercial work?
3–8% for hard-bid public work; 5–12% for negotiated private work or CMAR delivery.
Are bonds and insurance part of the fee?
No. Bonds (1–2%) and insurance (1–2%) are separate line items under general requirements, not fee.
How do GCs price risk?
By project — schedule pressure, design completeness, owner reputation, and LD exposure all change markup. Flat-rate markup across all projects leaves money on the table on safe work and loses money on risky work.
What's the difference between contingency and fee?
Contingency covers known-unknowns within the GC's scope. Fee is profit and home-office overhead. They serve different purposes and shouldn't be combined.
Bottom line
Transparent pricing builds trust. Owners who understand GC fee structure get better bids and fewer [change order](/construction-change-order-management)s.
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