Wrap Rate

What is Wrap Rate?

A wrap rate is a multiplier that converts a direct labor amount into a burdened amount. Depending on its definition, it may include fringe, overhead, general and administrative costs, and sometimes profit. Always state what the multiplier includes before using or comparing it.

How to use it

Confirm the allocation base for every rate. Multiplying factors is valid only when the assumed sequence matches the actual model. Distinguish cost from price, and markup from margin. Do not apply a labor multiplier to materials or subcontract costs without checking the applicable treatment.

Example

If fringe is 30% of labor, overhead is 20% of labor plus fringe, and G&A is 10% of that subtotal, the illustrative cost wrap is 1.30 × 1.20 × 1.10 = 1.716. Other bases produce other results.

Reference

Federal Acquisition Regulation 31.203.

Further reading

Cost projection and budgeting guide.