Hourly rates can be funny things. Rates don’t mean much since some people work faster or more effectively than others. At the same time, though, many of the projects you propose or bid on require hourly rates.

How do you set a realistic hourly rate that ensures you’re going to be able to pay everyone, cover overhead and other non-chargeable costs, get the work done on time and make a reasonable profit?

A good starting point for setting hourly rates is some type of published wage scale. 

These wage scales aren’t all-inclusive, however. You still must add your overhead amounts to cover benefits, rent and other expenses as well as general and administration and profit. 

If you’re bidding on Colorado Department of Transportation projects or many other projects with a federal government component, you probably need to use Davis-Bacon Act wage tables — often referred to as the prevailing wage or Service Contract Act for services. In the absence of other guidelines for your proposals and bids, these wage rates offer a great starting point.

The Davis-Bacon Act requires each contract for more than $2,000 to which the United States or District of Columbia is a party for the alteration, construction or repair of public buildings or public works to contain a clause setting forth the minimum wages to be paid to various classes of laborers and mechanics employed under the contract. 

Contractors or their subcontractors must pay workers employed directly upon the site of the work no less than the locally prevailing wages and fringe benefits paid on projects of a similar character. 

Keep in mind these tables are just the base wage and fringe benefits. You must “gross up” those amounts to determine each fully burdened hourly rate.

Many other projects might use rates from the Colorado Division of Labor Standards and Statistics. The wages on the agency website are primarily directed at farm laborers and minimum wage workers. 

This agency has published extensive new and updated public guidance on a variety of Colorado wage and hour law topics. For more information, visit the website located at https://cdle.colorado.gov/wage-and-hour-laws.

Another source of typical hourly rates is your trade or professional association website. Websites for professional services hourly rates might already be fully burdened since the rates are slanted toward consultants. Websites for construction and other trades might or might not be fully burdened.

Your numbers will vary depending on whether or not you include fringe benefits in the base amount and what percentages you use for overhead, general and administration and profit. 

Still, the real cost of each worker is more than double their hourly rate. Bidding a project-based strictly on the base hourly rate is a money losing proposition. 

If you bid a project without using fully burdened hourly rates, you are almost certain to lose money and probably won’t be able to deliver on your contract.