OVERHEAD RATE FOR GRADING CONTRACTORS — WHAT IT SHOULD BE.
The target overhead rate for grading contractors doing $2M–$8M is 10–14% of revenue. Most are running higher without knowing it because the rate has never been formally calculated — or owner salary is not included at market rate. Every point of gap between bid rate and real rate is unrecovered overhead coming directly out of net profit on every project.
Overhead rate is not a number you guess at or borrow from a trade association chart. It is calculated from your specific fixed costs divided by your specific revenue. The benchmark range gives you a target. Your real number tells you whether you are on track, elevated, or structurally underpricing every bid you submit.
WHAT OVERHEAD SHOULD LOOK LIKE FOR GRADING CONTRACTORS.
These benchmarks apply to commercial grading subcontractors doing $1M–$12M. The range tightens as revenue scales — a $1.5M contractor may run 14–16% overhead as fixed costs are spread over a smaller revenue base, while an $8M contractor should be in the 10–12% range.
THE LINE ITEMS THAT PUSH GRADING OVERHEAD ABOVE TARGET.
GPS and Machine Control Systems
Grading contractors rely on GPS machine control — purchase price, subscription fees, and maintenance. Machine control systems run $40,000–$80,000 per machine. Annual overhead cost — depreciation plus maintenance plus subscription — can run $8,000–$15,000 per machine per year when not charged to projects at a daily rate.
Equipment Fleet Between Projects
Large grading equipment is expensive to sit idle. The carrying cost between project mobilizations — depreciation, insurance, storage, maintenance — belongs in overhead proportional to downtime. A $2M fleet at 75% utilization carries 25% of annual ownership cost as overhead — $40,000–$80,000 per year depending on fleet age.
Environmental Compliance Administration
Grading contractors manage erosion control maintenance, inspection coordination, and agency communication that is not always fully job-costed. Environmental compliance administration — record keeping, inspection scheduling, corrective action coordination — is typically an overhead function on most projects.
THE CALCULATION — ONE SITTING, REAL NUMBER.
The interactive calculator: The CFOS overhead rate calculator walks through every line item category and produces your real overhead rate in about 10 minutes. Use it at constructioncfo.net/construction-overhead-rate-calculator-interactive
FREQUENTLY ASKED.
