Quick Summary: Winning jobs at the wrong price is worse than not winning them at all. To price oilfield subcontract work profitably, you need to know your true fully-loaded cost per hour, apply a markup that covers overhead and risk, and write a scope-of-work that protects you from unpaid extras. This guide walks you through each step.
Pricing oilfield subcontract work correctly is one of the most important skills a field service company can develop, and one of the least taught. Most operators assume you know what you’re doing. Most subcontractors assume they do too, until they get to invoice time and realize the job that looked profitable on paper left them in the red. This guide covers how to price oilfield subcontract work from the ground up: calculating true costs, setting markup, handling the tricky line items that kill margins, and writing bids that hold up when the scope starts to drift.
The Most Common Pricing Mistakes That Cost Oilfield Subcontractors Money
Before you build a better pricing model, you need to know where the current one is bleeding. These are the mistakes that show up repeatedly in field service company financials.
Pricing labor at wage rate instead of fully-loaded cost. If your hand earns $35 per hour, that is not your cost. By the time you add payroll taxes, workers’ compensation, benefits, and your WCB (Workers’ Compensation Board) premiums, you are likely at $50 to $60 per hour before a single dollar of overhead is applied.
Ignoring overhead entirely. Rent, insurance, administrative staff, vehicles sitting in the yard, software subscriptions, safety compliance costs including ISNetworld fees and COR (Certificate of Recognition) maintenance, all of that has to come from somewhere. If you are not building it into your price, it comes out of your profit.
Not pricing mobilization separately. Driving three hours to location and three hours back is not free. Neither is rigging up equipment. If your bid assumes the work starts the moment you arrive and ends the moment you leave, you are donating hours to the operator.
Treating standby as full rate. Standby time, where your crew is on location but cannot work due to weather, waiting on other trades, or equipment issues, should be priced explicitly in the bid. If it is not, operators will argue it at invoice time.
Underestimating scope and not protecting against changes. A bid written on a vague scope description is an open invitation for scope creep. Without a defined limit, every “while you’re at it” request becomes an unpaid extra.
Discounting to win and planning to make it up on extras. This strategy fails more than it works. Operators with tight AFE (Authorization for Expenditure) limits often have no authority to approve extras at all.
How to Calculate Your Fully-Loaded Cost Per Field Hour
Your fully-loaded cost is the minimum you need to charge just to break even. Everything above that is margin. Here is how to build it.
Step 1: Start With Direct Labor
Take your employee’s base wage and add the following:
| Cost Component | Typical Range (% of Base Wage) |
|---|---|
| Payroll taxes (FICA, FUTA, SUTA) | 10–15% |
| Workers’ compensation insurance | 5–20% (varies by trade and state) |
| General liability insurance (allocated) | 3–8% |
| Health/dental benefits | 8–15% |
| Paid time off (vacation, sick, holidays) | 5–8% |
| Total labor burden | 31–66% |
If your hand earns $35 per hour and your burden rate averages 45%, your true direct labor cost is around $50.75 per hour. Many field service companies price at $38 to $42 and wonder why payroll always feels tight.
Step 2: Add Equipment Costs
For owned equipment, calculate a realistic internal rate that includes:
- Depreciation (divide purchase price by useful life in hours)
- Maintenance and repair reserves (typically 10–15% of asset value per year)
- Fuel and consumables
- Insurance specific to that unit
A work truck that cost $60,000 and runs 2,000 hours per year has a depreciation cost of $6 per hour before you add fuel, insurance, or maintenance. Most field service companies charge equipment at cost or slightly below market rate, which means they are not recovering full ownership costs.
Step 3: Allocate Overhead
Add your monthly fixed overhead, things like office rent, admin salaries, software, phones, and professional services, and divide it by your billable field hours per month. If your overhead is $20,000 per month and your crew produces 400 billable hours, your overhead allocation is $50 per billable hour. That number may surprise you. It surprises most subcontractors.
Step 4: Arrive at Your Fully-Loaded Cost
Add the three components:
Fully-loaded cost = Direct labor + Equipment rate + Overhead allocation
Using the example above: $50.75 (labor) + $25 (equipment) + $50 (overhead) = $125.75 per billable hour, before any profit.
This is your floor. Your bid price starts here.
What Markup Percentage Should Oilfield Subcontractors Apply?
Markup and margin are not the same thing, and confusing the two is one of the most common errors in bid pricing. Here is the difference:
- Markup is the percentage you add on top of your cost.
- Margin is your profit expressed as a percentage of the selling price.
Example: your fully-loaded cost on a job is $100. You apply a 25% markup, so you bill $125. Your profit is $25. But $25 divided by your $125 selling price is only a 20% gross margin, not 25%. The gap widens as the numbers get bigger. On a $500,000 job, the difference between a 25% markup and a 25% margin is roughly $25,000.
Quick reference:
| Markup on Cost | Actual Gross Margin |
|---|---|
| 20% | 16.7% |
| 25% | 20.0% |
| 33% | 25.0% |
| 50% | 33.3% |
When an operator or partner quotes a margin expectation, make sure you know which number they mean, and which number you are actually quoting.
General benchmarks for field service in oil and gas:
| Work Type | Typical Target Gross Margin | Equivalent Markup on Cost |
|---|---|---|
| Routine T&M (Time and Materials) field work | 20–30% | 25–43% |
| Specialty or licensed trades | 30–40% | 43–67% |
| Lump Sum or fixed-scope projects | 35–50% | 54–100% |
| Hazardous work, remote location, offshore | 40–55% | 67–122% |
In construction (commercial and civil), gross margins of 15 to 25% are common because competition is intense and operators are price-sensitive. In upstream oil and gas, especially during high rig count periods when crews are scarce, experienced subcontractors can and should command 35 to 50% gross margins because the risk, mobilization burden, and compliance costs are significantly higher.
Apply higher markup when:
- The scope is poorly defined
- The location is remote or involves significant mobilization/demobilization
- The operator has a history of ticket disputes or slow payment
- You are being asked to perform the work on a lump sum basis without a detailed scope
The markup floor for any oilfield subcontract job should never drop below 20% gross margin. Below that, one blown tire, one injury with workers’ comp implications, or one month at Net 60 payment terms can eliminate your profit entirely.
How to Price Mobilization, Standby Time, and Weather Delays
These three line items are where field service companies either make back margin or quietly eat it. Get them in writing before the work starts.
Mobilization and Demobilization
Mob/demob should be a separate line item on every bid. Include:
- Drive time at a defined rate (typically your field labor rate, sometimes a reduced rate)
- Mileage or fuel for equipment moves
- Any hotel or per diem if an overnight is required
- Rig-up and rig-down time at full rate
A crew of two driving three hours each way to a wellsite in West Texas at $60 per person per hour represents $720 in labor cost before they have turned a wrench. If that is buried inside your lump sum price and the scope takes less time than expected, you have gifted the operator your mob cost.
State it plainly in your bid: “Mobilization: $[amount] per trip. Demobilization: $[amount] per trip. Billed regardless of job duration once crew is dispatched.”
Standby Time
Standby happens. Weather rolls in, another contractor holds up the sequence, or the operator is waiting on parts. Your people are still on the clock.
Define standby rate explicitly. Common approaches:
- Full rate standby: Same as working rate. Justified when your crew cannot take other work.
- Reduced standby: 50 to 75% of field rate. Common in T&M contracts, sometimes required by the Master Service Agreement (MSA).
- Standby cap: Some operators will accept standby billing only up to a set number of hours per day. Define your limit in the bid.
Whatever rate you agree to, document it. Standby is one of the most contested line items on a field ticket. If it is not in the bid and the MSA, you may not collect it.
Weather Delays
In the Gulf Coast and Permian, weather delays are common during hurricane season and winter storm events. Your bid should specify:
- Whether weather standby is billed at full or reduced rate
- How weather standby is initiated and documented (who calls it, how it is logged)
- Your right to demobilize and re-mobilize if delays extend beyond a defined threshold
How to Write a Scope-of-Work That Protects You From Scope Creep
The scope-of-work section of your bid is your legal and commercial protection. A vague scope is not just a business problem. It is the mechanism by which profitable jobs become money-losing ones.
Elements of a scope-of-work that protects your margins:
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Describe exactly what you will do. Use specific quantities, locations, and activities. “Install 200 linear feet of 4-inch production piping from wellhead to separator, including fittings, per the provided isometric drawing dated [date]” is a scope. “Piping work” is not.
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Explicitly state what is excluded. List adjacent tasks that might be assumed but are not included. “Painting, insulation, civil work, and any tie-ins beyond the battery limit marked on drawing [X] are excluded from this scope.”
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Define your assumptions. “This price assumes the following: free and clear access to work area, all materials supplied by operator, work to be performed during standard daylight hours.” If an assumption is violated, you have the foundation for a change order.
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Include a change order clause. “Any changes to this scope will be documented via written change order prior to execution. Additional work performed without a signed change order will be billed at $[rate] per hour T&M.”
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Reference the revision. If you are bidding off a drawing or specification, reference the exact revision number. When the operator updates the drawing and expects you to absorb the additional work, your bid clearly priced revision 3, not revision 5.
Good job costing starts with a good scope, because it gives you something to measure actual costs against. Platforms like Aimsio make it easier to track actual costs against your bid in real time, so you know whether a job is profitable before you finish it, not after.
When to Walk Away From a Job That Won’t Support a Profitable Price
Not every job is worth taking. This is a harder lesson for smaller subcontractors who need revenue to cover fixed costs, but the math is unambiguous. A job that loses money is worse than no job at all because it consumes your crew’s capacity, your equipment hours, and your management attention while producing negative returns.
Walk away indicators:
- The operator’s budget is already set and is below your fully-loaded cost plus minimum margin
- The MSA or bid terms require you to hold rates for 12+ months on a market where your input costs are rising
- Payment terms are Net 60 or longer and you are already carrying high DSO (Days Sales Outstanding)
- The scope is undefined and the operator resists adding a change order clause
- The operator has a history of ticket rejection or backcharge disputes with other subcontractors
- You are being asked to lump sum a job with significant unknowns underground or inside existing equipment
How to walk away professionally: Respond with your actual price, clearly built up and justified. If the operator cannot meet it, say plainly: “Based on our costs and the requirements of this scope, we cannot perform this work profitably below $[amount]. We’d be glad to revisit if the scope changes or the budget can be adjusted.” This preserves the relationship and positions you as a serious business, not someone who will cave on price.
Keeping your work on hand (WOH) filled with profitable jobs, even fewer of them, is always better than a full schedule that does not generate cash.
Bottom Line
Oilfield subcontractors lose money on jobs they win because they price labor at wage rate instead of fully-loaded cost, ignore overhead, and write scopes too vague to defend. Build your price from the bottom up, apply a markup that reflects your real risk and compliance burden, and put every exception including mobilization, standby, and change order terms into writing before the first truck rolls. A bid that protects your margins is not aggressive. It is professional.
