The G&A rate in government contracting is one of the most misunderstood components of pricing. It is not markup. It is not optional. It is the structured recovery of the cost required to operate the business itself.
G&A is often invisible at the job level, which is why it is commonly misunderstood. It does not show up as a line item on a field report, but it exists in every project.
When G&A is not recovered, the company is not just underpricing the job — it is absorbing business-level cost without compensation.
Common questions:
These questions all come from the same misunderstanding: the rate is not the cost — the base determines the percentage.
Many contractors react to G&A percentages emotionally rather than structurally. A higher percentage does not mean the business is inefficient — it often means the base is smaller.
The choice between Total Cost Input (TCI) and Value-Added Base (VAB) is not arbitrary. It changes how cost is distributed across the contract structure.
Includes nearly all cost elements, including pass-through. This spreads G&A across a larger pool and lowers the visible percentage.
Excludes pass-through costs and focuses recovery on value-added activity. This increases the percentage but improves alignment with actual business effort.
Concentrates recovery into a narrow base, often producing the highest rate. This is commonly used in forward pricing environments where traceability matters.
In government contracting, G&A is not just a percentage applied to cost — it is part of a structured forward pricing approach. Guidance from the Defense Contract Audit Agency (DCAA) highlights how forward pricing rates must be supported by consistent cost structure, traceable assumptions, and repeatable methodology.
This is where many contractors struggle. G&A is often treated as a static percentage rather than a dynamic cost pool that behaves differently depending on the selected base, labor structure, and revenue model.
FALIB® (Financial & Labor Intelligence Blueprint) addresses this by isolating G&A as a true cost component within the total financial model. Instead of forcing a rate to fit the job, FALIB® builds the structure first — allowing G&A to be calculated, validated, and consistently applied across forward pricing scenarios.
| Base Type | Typical Rate | Why It Changes |
|---|---|---|
| Total Cost Input (TCI) | 8.50% | Larger base → lower % |
| Value-Added Base (VAB) | 17.50% | Excludes pass-through → higher % |
| Direct Labor Base | 35.00% | Smaller base → highest % |
This is one of the most common structural issues identified when companies implement FALIB® analysis for the first time.
| Component | Amount ($) |
|---|---|
| Total Cost Input (TCI) | 21,808,278 |
| G&A | 1,981,280 |
| Value Added Base | 4,332,994 |
Same dollars. Different denominator. Different percentage.
Break-even does not mean payroll is covered.
Both FALIB®-Mr™ and FALIB®-Sr™ isolate G&A as a real cost pool.
This connects directly to BreakEven+™ where every cost is structured before pricing.
If you choose a G&A rate first, the model is already broken.
G&A is not a lever to adjust pricing. It is a cost that exists whether it is recovered or not.
If it is not built into the rate structure, the company absorbs it. If it is absorbed, profitability becomes unstable.
Explore more SERVVIAN® resources that support estimating, cost visibility, pricing discipline, and contractor profitability. Without a fully structured breakeven, pricing is not a strategy — it is a risk.
The information provided is for educational and planning purposes only. G&A methodologies and base selection (TCI or VAB) must be evaluated based on each company’s specific cost structure, contract type, and regulatory environment. Servvian does not provide legal, tax, or government compliance certification advice. Contractors are responsible for ensuring alignment with applicable accounting standards and contractual requirements.