OVERHEAD

Definition

Overhead (OH) is an indirect cost pool for expenses supporting direct work: rent, utilities, equipment, non-billable management. Expressed as a rate applied to direct labor dollars.

Where this matters in federal contracting

OVERHEAD is a measurement used in federal contract evaluation, source selection, oversight, or performance management. Understanding OVERHEAD matters because evaluators use metrics like it to compare proposals quantitatively, score past performance, set award-fee outcomes, and decide who gets the next option year. Contractors who track how OVERHEAD is calculated — and what target values look like in their NAICS or service area — write proposals that are concrete and defensible instead of generic and easily dismissed. OVERHEAD also has implications for contract administration: getting the calculation methodology wrong post-award is a common source of disputes and contracting-officer modifications. Pair OVERHEAD with the related metrics above to see how the federal government composes evaluation criteria into source-selection narratives.

More metric terms