Typical change order markup (OH&P): what’s fair and how to push back
Learn how overhead and profit (OH&P) markup works on change orders, what’s typical, common red flags, and exactly what to ask your contractor.
A change order often lands at the worst moment: the project is midstream, the schedule is already stressed, and the contractor needs a decision. That is exactly why markup and overhead can quietly grow, especially when line items are vague or bundled.
This guide explains what markup is, how overhead and profit usually appear, when markup is reasonable, and when a homeowner should ask for backup before approving the change order.
What is OH&P markup?
OH&P usually means overhead and profit. It helps a contractor cover supervision, insurance, office administration, compliance, vehicles, small tools, coordination time, and the business's profit margin.
Markup can appear as a separate line item, inside labor rates, inside material unit prices, inside a lump sum, or layered on top of subcontractor quotes. Markup itself is not automatically wrong. The problem is unclear markup, duplicated markup, or markup applied to the wrong base.
Why markup often increases on change orders
Change orders can legitimately cost more than planned work because they create disruption. A small change can force resequencing, remobilization, inspection coordination, overtime, or work around finished areas.
That means a markup percentage is only one signal. The better question is whether the contractor shows the labor hours, material quantities, subcontractor backup, and subtotal that the markup is applied to.
What is a typical markup range?
There is no universal markup percentage. Many residential and light-commercial change orders show overhead and profit in the 10% to 25% range, but project type, contract terms, trade mix, schedule pressure, and subcontractor involvement can change the right comparison.
If markup is higher than expected, do not assume it is inflated. Ask what base it applies to, whether overhead and profit are already included in unit prices, and whether subcontractor quotes already include their own markup.
The markup red flags that matter most
Watch for double markup. A subcontractor quote may already include overhead and profit, then the general contractor adds another OH&P line without explaining what it covers.
Watch for high markup with no cost breakdown. If the change order does not show labor hours, hourly rates, quantities, unit costs, and subtotals, the markup percentage is not very meaningful.
Watch for markup on pass-through costs. Permits, fees, and certain allowances may not deserve the same overhead and profit treatment as contractor-performed labor.
Watch for a management fee plus OH&P. A management fee can be legitimate, but it can also duplicate overhead by another name.
Watch for a markup percentage without a base. Fifteen percent of what? Direct costs only? Tax included? Prior markup included? That base should be visible.
What to ask your contractor
Use a calm, evidence-focused script:
I want to approve this quickly. Before I do, can you help me understand the cost basis? For each line, can we confirm labor hours and rate, material quantities and unit prices, and whether OH&P is already included or added separately?
You can also ask:
- Are overhead and profit already included in these unit prices or subcontractor totals?
- What subtotal is the markup percentage applied to?
- Which items are pass-through costs versus contractor-performed work?
- What does the management fee cover that is not already covered by OH&P?
How to benchmark markup without becoming an estimator
You do not need to become a professional estimator to spot markup risk. You need a clean list of line items, the project ZIP code, and enough structure to separate labor, material, equipment, subcontractor, and markup lines.
If the change order does not provide that structure, the first negotiation move is simple: request the backup needed to benchmark the price.
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