What Is A Fair Overhead And Profit Markup In Construction?
A practical way to evaluate OH&P fairness and avoid duplicated markup in change orders.
There is no single "correct" OH&P percentage for every project. Fairness depends on project type, scope complexity, and the markup base.
What OH&P is supposed to cover
- Overhead: supervision, coordination, admin, insurance, and operating costs.
- Profit: business return for execution risk.
Markup itself is not the issue. Hidden or duplicated markup is.
How fair markup is usually evaluated
- Is the percentage within a normal market range for this project type?
- Is the base subtotal clearly defined?
- Are subcontractor markups already embedded before GC markup is added?
- Are pass-through costs treated separately?
Duplicated-markup pattern to watch
- Subcontractor quote includes overhead and profit.
- GC applies full OH&P on that total.
- A separate project-management fee is added again.
That stack can materially inflate the final total unless justified.
Better questions to ask
- "What subtotal is this markup percentage applied to?"
- "Does this subcontractor quote already include overhead and profit?"
- "Which costs are pass-through and which are managed work?"
Clear answers should map directly to the line-item math.