Also referred to as the direct labor “multiplier”, it is a fully burdened labor rate - the rate at which an organization must bill out its direct labor units to cover its direct and indirect costs; before any profit is made.
For an organization to break even on a total cost basis – each unit of direct labor must cover the direct costs of that labor plus a proportionate share of the organizations indirects – fringe, overhead, g&a etc.
Understanding how to calculate these rates is crucial for a services based organization. Simply guessing at a labor rate in a proposal could be disastrous and costly for an organization, especially in a multiyear proposal where rates are locked in for several years.
Make sure you start with a solid budg...