OVERHEAD RATE BENCHMARKS FOR MARINE CONTRACTORS
Marine subcontractors typically run 28–42% overhead on direct labor (with equipment costed separately by production hour) or 12–18% overhead on direct cost (with equipment absorbed in the rate). The wide range reflects significant differences in equipment intensity, geographic concentration, and project mix between marine subs. Equipment-heavy marine subs (heavy pile driving, dredging, deep-foundation work) run at the higher end. Labor-heavy marine subs (light marine construction, fender systems, dock building) run at the lower end. The rate matters less than whether it’s calibrated to actual overhead reality and recalibrated quarterly.
The marine overhead rate isn’t one number. It’s a function of equipment intensity, geographic concentration, and the customer mix the business actually works.
MARINE OVERHEAD RATE RANGES
Marine subcontractor overhead rates vary more by allocation method and equipment intensity than by revenue band. The following ranges are benchmarks SPM sees across active marine engagements:
- On direct labor (equipment costed separately): 28–42%. Most properly-structured marine subs land in this range with equipment-by-production-hour costing pulling significant cost out of general overhead.
- On direct cost (equipment absorbed in overhead): 12–18%. The lower percentage reflects equipment cost flowing through the absorption rate rather than being separately allocated.
- On production hours (equipment-hour basis): $45–$95 per production hour for general overhead, plus equipment-specific hourly rates for major equipment ($85–$340 per equipment hour depending on equipment class).
The right basis for a specific marine sub depends on the work mix. Pile driving and deep-foundation subs typically use equipment-hour basis because equipment time dominates the cost structure. Dock-building and fender-system subs typically use direct-labor basis because labor dominates. Mixed-scope subs often use direct-labor with equipment carved out separately.
WHY MARINE RATES VARY SO MUCH
EQUIPMENT INTENSITY
Marine equipment fleets range from $500K (light marine construction) to $8M+ (heavy pile driving, dredging). Equipment-heavy subs have substantially more fixed cost to absorb — depreciation, financing, insurance, mooring, transportation. Their overhead rates run 8–15 percentage points higher than equipment-light marine subs at the same revenue scale.
GEOGRAPHIC FOOTPRINT
Marine subs operating across multiple states or coasts carry higher overhead than geographically concentrated subs. Travel, lodging, equipment transportation, multi-state licensing and insurance, and management oversight all increase with footprint. A regional marine sub typically runs 4–8 points lower overhead than a national-footprint marine sub at the same revenue.
PUBLIC SECTOR VS. PRIVATE COMMERCIAL MIX
Public sector work (USACE, port authorities, state DOTs) carries higher compliance overhead (DBE/HUB reporting, prevailing wage tracking, Buy American compliance, certified payroll, EEO reporting) than private commercial work. Heavy public sector subs typically run 3–6 points higher overhead than commercial-heavy marine subs at the same revenue.
BONDING AND INSURANCE PROGRAMS
Marine work requires higher bonding and insurance limits than most construction trades. P&I coverage, MEL coverage, USL&H coverage, jones act exposure — marine insurance programs typically run 2–3x the cost of equivalent land-based programs. The carrying cost of bonding capacity for major projects also runs higher. Both flow through overhead.
SHOP AND FABRICATION INFRASTRUCTURE
Marine subs with in-house fabrication shops (steel pile fabrication, wood timber crib construction, specialty rigging) carry shop infrastructure as overhead unless allocated to specific projects. Shop-equipped marine subs typically run 4–9 points higher overhead than field-only marine subs, though the shop capacity often translates to margin advantage on specialty work.
WHERE MARINE OVERHEAD RATES GO WRONG
- Equipment cost double-counted. Some marine subs allocate equipment by production hour AND include equipment-related overhead in the general overhead rate, double-counting equipment cost in bid math.
- Mobilization cost absorbed in overhead. Mobilization is a project-specific cost that should appear in the SOV, not absorbed into general overhead. Marine subs that absorb mobilization in overhead artificially inflate their overhead rate and underprice mobilization on bids.
- Permitting cost in overhead. USCG/ACOE permitting cost is typically project-specific and reimbursable. Subs that absorb it in overhead miss billing opportunities.
- Crew burden mixed into overhead. Crew burden (workers comp, payroll taxes, training, certifications, USL&H) belongs in direct labor cost, not overhead. Marine subs mixing the categories distort which work is actually profitable.
- Stale rate calculation. Marine equipment financing, insurance premiums, and compliance costs change continuously. Annual rate calculations drift 3–7 points off reality over the course of the year. Quarterly recalibration is the structural standard.
HOW THE RATE SHOULD BE CALCULATED
For marine subs, the recommended calculation methodology:
Step 1: Pull trailing 12-month actual overhead from the financials. Include G&A, vehicle expense (non-production), office occupancy, insurance (general business, not marine project-specific), professional fees, software, training, management compensation. Exclude equipment-specific cost (handled separately) and project-specific cost like mobilization and permitting.
Step 2: Calculate equipment hourly rates separately for major equipment ($30K+ replacement cost). Include depreciation, financing, insurance, maintenance, fuel where applicable. Generate hourly rates per equipment class.
Step 3: Apply general overhead to direct labor as the absorption basis. Direct labor includes wages, burden, USL&H, certifications.
Step 4: Validate the rate against trailing volume. Total overhead recovered through the rate should approximate total overhead spent. Adjust if material gap exists.
Step 5: Recalibrate quarterly. Marine cost categories move continuously; annual recalculation drifts too far off reality.
The right overhead rate for your marine business isn’t an industry average. It’s the calibrated rate that recovers your overhead reality, recalculated quarterly, applied correctly into every bid.
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