HOW GENERAL CONTRACTORS MARK UP SUBCONTRACTORS.
General contractors mark up subcontractor and material costs by 10% to 20%, most often around 15%, to cover their overhead, risk, and profit for managing the project. That markup comes out of the owner’s budget, not yours. What actually decides your margin is whether your own bid recovered your real cost and overhead.
Most subcontractors assume the general contractor’s markup is money taken off the top of their work. It is not. The GC markup is a fee the GC charges the owner for carrying and coordinating the project, and it sits on top of your price in the owner’s budget. Your margin is set entirely by your own number: what you bid, what the work actually cost, and whether your overhead was recovered. The GC markup matters for understanding the deal, but it is not the lever that determines whether you make money. Your job costing is. This page explains how GC markup works, how it changes by contract type, and where your margin actually comes from.
WHAT GC MARKUP ACTUALLY IS.
A general contractor markup is the percentage a GC adds to subcontractor and material costs to cover its own overhead, risk, and profit. On most commercial work that markup runs 10% to 20%, and 15% is the figure you will see most often.
The markup pays for what the GC does: scheduling, coordination, supervision, insurance, bonding, warranty exposure, and the office that runs all of it. A GC that marks up 15% is not pocketing 15%. After its own overhead, the GC nets a single-digit percentage, the same squeeze every contractor lives with.
The number a subcontractor needs to understand is this: the GC markup is added to your price in the owner’s budget. The owner pays your number plus the GC’s markup on it. The markup does not reduce what you collect.
THE MISREAD THAT COSTS YOU.
It is not your money to begin with.
The markup sits on top of your bid in the owner’s budget. If you bid $100,000 and the GC marks up 15%, the owner pays $115,000 and you still collect your $100,000. The GC’s margin and your margin come from two different places. Treating the GC markup as a cut of your number leads subs to underbid, hoping to look cheaper, when the GC markup never touched their margin in the first place.
You compete on your scope, not the GC fee.
Owners compare your scope against other subs in the same trade, not against the GC fee. Cutting your bid to offset a markup you do not pay just hands away your own overhead recovery. The way to win more work is a clean, complete, defensible number, not a discounted one.
They are two different calculations.
Markup is a percentage added to cost. Margin is profit as a percentage of the selling price. A 15% markup is roughly a 13% margin. Confusing the two is how subcontractors think they are making 20% when the real margin is closer to 13%, and it compounds every time overhead is left out of the cost base.
HOW THE MARKUP SHOWS UP.
The GC markup looks different depending on how the prime contract is written, but in every case your margin still comes from your own number, not theirs.
| Capability | Lump Sum | Cost-Plus / GMP | CM at Risk |
|---|---|---|---|
| Is the markup visible to you? | No, buried in the GC price | Yes, stated as a fee % | Yes, stated as a fee % |
| Typical markup range | 10% to 20% | 8% to 15% | 8% to 12% |
| Who carries cost overrun risk | GC | Shared to a cap (GMP) | GC to the GMP cap |
| What it means for your bid | Bid your complete number | Document every cost cleanly | Document every cost cleanly |
| Where your margin comes from | Your own job costing | Your own job costing | Your own job costing |
PROTECT YOUR OWN NUMBER.
The GC markup is the GC’s problem. Your margin is yours, and these are the levers that set it:
YOUR MARGIN IS YOURS TO SET.
The Construction CFO has recovered over $2.1M in client accounts receivable since 2023, and almost none of it came from renegotiating a GC markup. It came from subcontractors finally pricing and tracking their own number.
Stop watching the GC fee. Watch your overhead recovery, your job costing, and your change orders. That is where a subcontractor’s margin is won or lost.
FREQUENTLY ASKED.
