HOW GENERAL CONTRACTORS MARK UP SUBCONTRACTORS.
General contractors typically apply a 10–20% markup on subcontractor bids for their own overhead and profit — meaning your $400K electrical bid becomes a $440K–$480K line item in their proposal to the owner. Understanding that markup helps you price smarter, negotiate better, and stop leaving margin on the table by underbidding work the GC was going to mark up regardless.
Most subcontractors know GCs mark up their work — but few know by how much, how it varies by project type and GC size, or what it means for their own pricing strategy. When you understand the full price stack from your bid to the owner's contract, you can make better decisions about where your floor actually is, when pushing back on a GC's value engineering is worth it, and how to position your number competitively without subsidizing the GC's margin with your own.
WHAT GCS ACTUALLY CHARGE ON YOUR WORK.
GC markup on subcontractor work goes by several names — overhead and profit (O&P), general conditions markup, or simply "the GC's cut." The specific percentage varies by project type, GC size, market conditions, and relationship — but the typical range for commercial construction is:
| Project Type | Typical GC Markup Range | What It Covers |
|---|---|---|
| Private Commercial | 10–15% | GC overhead, supervision, PM time, profit |
| Public / Government | 8–12% | GC overhead, bonding, compliance, profit |
| Design-Build | 12–18% | GC overhead, design coordination, risk, profit |
| Small Tenant Improvement | 15–25% | Higher relative overhead on small projects |
| Large Infrastructure | 6–10% | Lower % on large contracts, higher absolute dollar |
The number that matters: On a $600K subcontract at 12% GC markup, the GC is making $72,000 on your work — before they've done a single thing on your scope. That's not criticism — it's the GC's legitimate overhead and risk coverage. But it means the owner is paying $672K for work you're doing for $600K. Understanding that gap is the foundation of smart sub pricing.
HOW YOUR BID BECOMES THE OWNER'S CONTRACT PRICE.
Here's the full price stack on a commercial electrical subcontract so you can see exactly where the numbers go:
The owner is paying $472,000 for $400,000 worth of your work. The $72,000 difference is the GC's legitimate cost to manage the project, take on risk, and make a return. None of this is wrong — but it tells you something important: the owner has already priced in the GC's margin. There's room in the total budget for your work to be priced correctly. You don't have to be cheap to be competitive.
HOW GC MARKUP SHOULD CHANGE HOW YOU PRICE.
The GC Marks Up Your Number — Not Your Cost
The GC applies their markup to your bid price, not your direct cost. So if you sharpen your pencil to win a job and trim $20,000 off your margin, the GC's take on your scope actually decreases too — they're now marking up $380K instead of $400K. You absorbed the margin cut. The GC absorbed a small reduction in their absolute dollar markup. You both saved the owner money — but your share of the pain was disproportionate.
Value Engineering Requests Often Come Out of Your Margin, Not the Owner's Budget
When a GC asks you to sharpen your number, they're often protecting their own margin — not passing the savings to the owner. A GC who has a 12% O&P agreement with the owner makes more absolute dollars on a higher subcontract value. When they push you down, the owner may or may not see the benefit depending on the contract structure. Know this going in. "Can you sharpen your number?" is a negotiation, not a requirement.
Your Overhead Has to Be in Your Bid — The GC's Markup Doesn't Cover It
Some subcontractors mistakenly assume the GC's overhead markup means they don't need to fully price their own overhead. It doesn't work that way. The GC's O&P covers the GC's costs — their PM, their superintendent, their trailer, their bonding. Your overhead — your office staff, your trucks, your equipment maintenance, your insurance — has to be in your bid at your actual overhead rate. If it isn't, you're subsidizing the GC's project with your own operating costs.
HOW TO BID KNOWING THE FULL PRICE STACK.
FREQUENTLY ASKED.
