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How much should a general contractor mark up subcontractor bids?

When you pass a sub’s price straight through to the owner, you carry the risk of that trade for free: scheduling them, checking their work, chasing their insurance paperwork and paying them before the owner pays you. Marking up sub bids is how a general contractor gets paid for that. Here is a plain way to set the number.

What the markup on subs is paying for

• Your time: getting bids, comparing scopes, scheduling, walking the work and handling punch items.
• Your overhead: the office, insurance, vehicles and software that support every trade on the job.
• Your risk: a sub who no-shows, under-bids, or leaves damage you have to fix, and the cash you float between paying them and getting paid.
• Your profit: the reason you took the job in the first place.

Step 1. Level the sub bids before you mark anything up

Put the bids side by side and check that each covers the same scope: materials included or not, permits, cleanup and haul-off, patching after their work, and any exclusions. A low bid that leaves out drywall patching isn’t the low bid. Add the missing items as your own cost lines.

Step 2. Decide one rate or a rate by trade

Many GCs use one markup on all sub work to keep things simple. Others carry more on trades that need more of their time or carry more risk (a sub you haven’t used before, work that hides other work, or a trade that often comes back for fixes) and less on simple, reliable scopes. There is no standard percentage. Base yours on your own overhead rate and how much management each trade really takes.

Step 3. Remember markup is not margin

Step 4. Decide how the owner sees it

On a fixed-price bid, most GCs build the markup into the line prices. On cost-plus or open-book work, the contract usually spells out a fee on subcontracted work, so write it down before the job starts. Either way, say what is included in your exclusions and clarifications so extra sub work becomes a change order, with your markup on it.

Mistakes that cost GCs money on sub work

1. Passing sub prices through at cost and hoping your own labor lines make up for it.
2. Marking up an unleveled bid, then eating the scope the sub left out.
3. Forgetting markup on change orders that a sub prices for you mid-job.
4. Confusing markup with margin, so the job lands a few points under the profit you planned.

General education with example numbers only, not legal, accounting or contract advice. Rules on disclosing fees can depend on your contract type and local law; check with your attorney or accountant.

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