OVERHEAD RATE FOR UNDERGROUND UTILITY CONTRACTORS — WHAT IT SHOULD BE.
The target overhead rate for underground utility 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 UNDERGROUND UTILITY CONTRACTORS.
These benchmarks apply to commercial underground utility 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 UNDERGROUND UTILITY OVERHEAD ABOVE TARGET.
Locating and As-Built Documentation
Underground utility contractors carry ongoing locating coordination costs, as-built documentation requirements, and 811 notification administration. A contractor doing $4M in underground utility work may spend $25,000–$45,000 annually on locating coordination, as-built drafting, and 811 compliance that lives in overhead.
Safety Program and OSHA Compliance
Underground work carries mandatory safety requirements — confined space programs, trench safety equipment, competent person certification, safety officer time. Safety officer salary, training costs, equipment inspection, and compliance administration can run $30,000–$80,000 annually depending on company size and project risk profile.
Specialized Equipment Ownership
Underground utility contractors own HDD machines, vacuum excavators, and pipe fusion equipment. An HDD machine at $350,000 with a 7-year depreciation schedule generates $50,000/year in equipment overhead before maintenance and insurance when not being charged to a project at a daily rate.
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
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