If you propose adding the "overall wrap rate" to your subcontractor's direct labor, the fact that the direct labor is part of the base that determines the overall wrap rate is an important consideration and likely what the cost/price analyst will want to know if they get to that level of a review of your rates. However, since you will be proposing fixed rates for a T&M contract, you will also be considering other factors such as perceived value to the customer, competition, etc. As a customer getting charged more for the subcontractor's work than the prime's isn't going to set well unless I'm getting more for that uptick as well. Been there, paid more, didn't like it.