WRAP Rate Factors and price analysis
Source Data: 2017 & 2019 Economic Census published by the U.S. Census Bureau; Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics (OEWS) 2020 Report
The Census Bureau’s mission is to serve as the nation’s leading provider of quality data about its people and economy. This report contains information from the 2017: ECN Core Statistics Economics Census, 2019 Economic Census and 2020 BLS OWES report. These reports are generally updated annually and represent historical data from salary data and business tax receipts that we can utilize to estimate future industry revenue and costs unique to our purposes of validating proposed labor prices.
These are industry standard ‘wrap rates’ unique to each North American Industry Classification System (NAICS) codes. One can go from a two digit NAICS code to get a broad view of any industry to a specific 6 digit NAICS code. These estimates are not intended to be used for actual bidding purposes but rather as a starting point for a new business to compare with their own costs and to determine fair and reasonable prices for their labor proposals.
The ‘wrap rate’ is calculated by taking the difference in the total receipts and the total annual payroll. The wrap rate includes many factors to include fringe, overhead, G&A and profit. It is assumed that a company operating a at customer’s location would have a wrap rate that is 2/3rds of the calculated amount and each NAICS will all types of ‘standard’ operating costs unique to that industry.
Within this data set one can also get future specifics about locations and business ownership structure, status, size, and taxpayer status as well as learn more about their make-up of fringe costs and other indirect costs applicable to the industry as defined by NAICS, such as equipment and leasing equipment and real property.
Using these wrap rates and combining with direct labor estimates obtained from the Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics (OEWS) Report (see screenshot below), one can calculate a ‘fair&reasonable’ range of rates that will stand up to Government Contracting Officer scrutiny. Within the 2020 data, you get that hourly direct labor rates range from $14.30 (10th percentile) to $77.14 (90th percentile) and averages at $41.03 (Mean). Taking the 2.9 client site wrap rate and 4.4 company site wrap rates, we can calculate fully burdened labor rates (FBLR) and assess this data versus other data points. Be mindful that the latest BLS OWES data is from March 2020.
As example, in the “51” NAICS (Information and Data) code in the chart to the right, we have an hourly rate range of $41.82 to $338.46 compared to the ‘”561320” NAICS (Temporary Hiring) hourly rate range of $13.52 – $57.10 in the far right two columns.
This analysis is consistent with FAR 15.404-1 in taking a direct salary survey (from BLS OWES) and utilizing industry standard wrap rates (from Economic Census) to calculate a fair and reasonable price range for services. Mind you, these ranges are very broad as designed here, and these reports can be tailored to your purposes and unique user case.