What is overhead and profit (O&P)?

Overhead and profit (O&P) is the markup added to the direct cost of a job to cover a contractor's business costs (overhead) and earnings (profit).

Direct costs are the labor, materials, and equipment for the work itself. Overhead covers running the business — office, insurance, admin — and profit is the contractor's return. A common combined figure is a percentage added on top of cost.

O&P is why a job's price is higher than its raw cost. Change orders and estimates usually state cost plus an O&P markup.