Indirect Rates for Cost Plus Contracting Jenny W Clark. Jenny Clark

Transcription

1 Indirect Rates for Cost Plus Contracting Jenny W Clark Jenny Clark jwclark@solvability.com

2 Jenny W Clark The Oprah of Federal Contracting Solvability, Inc. Phone jwclark@solvability.com Linkedin Solvabilityjwc FLORIDA GovCon LinkedIn Community Podcast SUMMIT Twitter Solvabilityjwc

3 Cost Plus Contracting 1. What is Different About Cost Plus Contracting? 2. What additional pricing and reporting may be required? 3. What are typical Billing Formats? 4. How do we settle our Provisional and Actual Indirect Rates? 5. How are Indirect Rates Calculated (simplified version)?

4 Cost Plus Contracting More Advanced Contracting Method Shared Risk scope broadly defined Program or Personnel Oriented, R&D Longer Term > 3 Years Base plus Option Years Service Contract Act Incurred Cost Submission Flow-downs to Subcontractors

5 More Complex Pricing/Systems Required to show your Indirect Rate Calculation Based on your Income Statement Indirect Costs expresses as % of Direct Labor and Other Costs History and Projections Frequently must show several years of projections in proposal Do not share with your PRIME Contractors or TEAMMATES DCAA SF1408 PreAward Survey requested by Contracting Officer

6 Cost Plus Contracting Positives USUALLY Longer Term Reimbursed for all ALLOWABLE Costs Fee usually 6% to 8% Generally can count on the profit, unless OVERRUN PRIME Cost Plus mark of Maturity Negatives More complex billing More complex cost tracking Indirect rate management CRITICAL Must complete Incurred Cost Submission

7 Contract Value & Funding Typically Contract Line Items (CLINS) Task Orders or Delivery Orders Customer May Demand Additional Reporting Initial Contract with Ceiling Established Ceiling is POTENTIAL, not Authorized Broken down into: Cost $100,000 Fee 6,000 TOTAL $106,000

8 Contract Value vs Contract Funding Base year Cost $5,000,000 Fee 300,000 Total $5,300,000 Funding Mod Cost $1,000,000 Fee 60, 000 Total $1,060,000 Limitation of FUNDs Clause Allowable Cost & Payment Clause

9 Cost Plus Contracting Reimbursed for: Direct Labor Direct NonLabor (Travel, Materials, Subcontracts, etc.) Indirect Rates: Fringe, Overhead, G&A Fee% Indirect Rates Provisional Billing Rates (submit to DCAA) Actual Unaudited Rates Audited, Approved Rates Indirect Costs

10 Cost Plus requires Incurred Cost Submission FAR Allowable Cost and Payment Clause Created the requirement for an Incurred Cost Submission (ICS) Also called ICE (Incurred Cost Electronically) dcaa.mil Large, complex set of spreadsheets proving your allowable costs and indirect rates, reconciled to billing Due six months after close of fiscal year Subject to audit about 5 years behind MINIMUM of 40 hours to complete over 20 Worksheets!

11 ICE Example: Schedule I Ties to Billings by FY* Include Fee Amounts and WH so it ties to bills, but compare total COSTS incurred to COSTS billed

12 CHECKLIST FOR ICE Schedule A B C D E F G Description Summary of Indirect Rates G&A Overhead Intermediate Pools Bases for Pools Fringe General Ledger Reconciliation to Incurred costs/job Cost Ledger H Summary of Claimed Costs I Cumulative Claimed and Billed J Subcontractor Cost K T&M Contract/Labor Hours Detail L Reconciliation of Labor to Payroll M Management Decisions N Certification Letter O Contract Closeout data SUPPLEMENTAL DATA A-1 Comparison of Overhead to Prior Years A-2 Comparison of G&A to Prior Years A-3 Comparison of Facilities to Prior Years B Top 5 Highest Compensated Executives C Cost Plus Contracts where Our Company is a Subcontractor NOTE: Other information may be required check DCAA.mil for latest

13 Cost Plus Formats

14 Cost Plus is a Contract Type/Billing Format Direct Costs Indirect Costs FEE Cost Plus

15 Cost Plus Format Provisional Billing Rates Cost Element Provisional Billing Rate % Current Amount Direct Labor $100,000 Overhead 50% 50,000 G&A 10% 15,000 Total Cost 165,000 Fee 7% 11,550 Total Invoiced $176,550

16 Cost Plus Format with Actual Billing Rates Cost Element ACTUAL FY Rate % Current Amount Direct Labor $100,000 Overhead 40% 40,000 G&A 10% 14,000 Total Cost 154,000 Fee 7% 10,780 Total Invoiced $164,780

17 You Overbilled the Gov t WRITE A CHECK! Cost Element Billed Actual YOU OWE Direct Labor $100,000 $100,000 $ 0 Overhead 50,000 40,000 10,000 G&A 15,000 14,000 1,000 Total Cost 165, ,000 11,000 Fee 11,500 10, Total Invoiced $176,500 $164,780 $11,720 Your Provisional Indirect Rates were HIGHER than your ACTUAL rates

18 How to Avoid Writing the Gov t a Check Monitor your Indirect Rates Monthly Carefully track estimates through the end of your Fiscal Year You can adjust your provisional rates if needed Increase your spending slightly as you approach the end of the year.

19 GovCon Indirect Rate Math Pool Base Indirect Rate

20 SIMPLIFIED Indirect Rate Calculation Profit & Loss Amount G&A Pool G&A Base G&A Rate Revenue $ 870,000 Direct Labor 500, ,000 Overhead 250, ,000 G&A 75,000 75,000 10% Unallowables 5,000 Net Income $ 40,000 $75K $750K 10%

21 GovCon Indirect Rate Calculations Fringe Fringe Pool Costs divided by Productive Labor Base Fringe accts divided by Direct Labor, Overhead Labor, G&A Labor and B&P Labor Overhead Overhead Pool Costs divided by Direct Labor Base G&A G&A Pool Costs divided by Direct Costs plus Overhead NOTE! There are variations depending on company, strategy and business practice

22 Jenny W Clark CEO Solvability, Inc. Phone jwclark@solvability.com Linkedin Solvabilityjwc Twitter Solvabilityjwc

23 Question & Answer Time