Inquiry: Paul, I just reviewed part of your presentation to the audience at the American Legion.  I have a concern.  Your Indirect Costs include Fringe Benefits and Payroll Taxes.  In my experience, I assign them differently.  Is there a problem?

Response: Either way could be okay, as long as the method results in a fair and reasonable assignment of the costs to final cost objectives (contracts) AND the method is consistently used.  But let's look a bit deeper......

QUESTION: Paul, I'm confused about how to determine what our pool(s) and base(s) should be for our proposal writing. We have both commercial and non-commercial rates for many types of services. These rates vary greatly depending on what we do, how we do it, how long we do it, and even for whom we do it. Our pricing policy is written down but there are always special agreements and our non-commercial rates are generally lower. All of our direct and indirect costs are built into our rates. How do I determine what our labor costs are? What could I possibly use as a base? What do you think? 

RESPONSE: Wow! A lot of questions on your mind - let's begin with an important concept.......

Professional and consultant service fees represent costs of services rendered by persons who are members of a particular profession or possess a special skill and who are not officers or employees of the contractor. Such costs include those of outside accountants, lawyers, actuaries, and marketing consultants. Contractors should be requested to obtain billings from outside professionals and consultants that itemize amounts applicable to retainer agreements, fees for services not covered by a retainer, expenditures for investigative and other services, travel, and miscellaneous expenses. 1- What other cost principles should you consider? The cost principle covering outside professional and consultant services is contained primarily in (1) FAR 31.205-33, Professional and consultant service costs. However, consider the following cost principles in determining allowability since efforts covered by these cost principles are often performed by consultants: (2)FAR 31.205-27 Organization costs; (3) 31.205-30 Patent costs; and (4) 31.205-47 Costs associated with a legal or administrative proceeding. 2- Are these costs allowable? Properly supported professional and consultant service costs are generally allowable per FAR 31.205-33 when reasonable in relation to the services rendered, unless they are for activity made unallowable by other cost principles. Three Key factors, among others, an auditor will consider in determining Allowability are:

I get frequent calls from companies that never thought they would be audited or just did not expect an audit at the time. So what do you do when you get the call? Well first, don't panic. The government or your prime contractor is just following protocol to ensure they are either getting...

Inquiry: Hi Paul, At the present time DCAA is in the process of auditing our G&A and in directs.   If you have any examples of how we calculate fringes, it would be helpful.  They seem to think we are low on our fringes.

Response: We do have an electronic file (e-file) that should help you.  Many others have used it as a template to get a quick look at "what might be".  They replaced the sample numbers with their own and the spreadsheet calculated their rates.  It is very inexpensive!  Here is where to go.....

 

INQUIRY: Hi Paul,  Can you explain the difference of putting travel and client expenses into B&P versus G/A?  RESPONSE: B&P (Bid and Proposal) expenses are typically for costs incurred during the Proposal Phase while similar type costs would typically go into G&A when they are incurred for the General and Administrative activities of the company, but not for B&P purposes. Lets look closer....

Are you a Prime or Subcontract doing business or hoping to do business with the government?

Well, there are several important checklists you should have in your Tool Chest, alongside the tools we provide.  There are others, but we must start somewhere.  And they’re free!   

Really Free? Well, since your tax dollars paid for them, “technically” they aren’t free!

Inquiry: Any subcontract costs we incur will be a part of our G&A base, so my question would be is there anything in FAR 52-232-7 that precludes us from adding G&A on top of these subcontract costs?

Response: Let me answer in the Affirmative Tense: The simple answer is Generally Yes; you can add G&A to subcontract costs.   FAR 52.232-7 clearly lists Subcontracts under Materials and allows for adding Indirect costs to these.

However, your inquiry is much more in-depth than first meets the eye, and it should be.  So let’s look beyond the obvious...

TRENTON, N.J. – A former Department of Veterans Affairs (VA) employee who worked as a supervisory engineer at the VA’s campus in East Orange, N.J., today admitted accepting more than $1.2 million in kickback payments in connection with VA contracts awarded to companies with which he had relationships, and to engaging in a scheme to defraud the VA by claiming one of those companies was owned by a service-disabled veteran when it was not, New Jersey U.S. Attorney Paul J. Fishman announced.

Audit Alert on Allowability of Lodging, Meals and Incidental Expenses under FAR 31.205-46, Travel Costs

The Government travel regulations provide for two ceiling amounts: one for lodging and one for meals and incidental expenses. However, as provided in CAM 7-1002.3c(2), contractors are subject to only one ceiling,

The DDP memorandum states that costs incurred for ineligible dependent health care are unallowable under FAR 31.201-3 and violate the selected cost principle at FAR 31.205-6(m);

However, these unallowable costs are not expressly unallowable. Therefore, auditors should not pursue application of penalties under FAR 42.709 to the questioned ineligible dependent health care benefit costs. Accordingly, auditors also should not cite contractors that fail to exclude these costs from Government contracts for noncompliance with CAS 405.

The greatest want of the world is the want of men – men who will not be bought or sold

Inquiry: Dear Paul, Truly enjoyed your class last Tuesday...thank you. The SBA office and I were discussing a proposal I'm working and it was suggested I email you with the problem I'm having. The problem is how to price because I'm not sure how to apply my indirect costs? I emailed the CO with my concerns and her reply basically just directs us back to the statement of work (SOW). So what would you suggest?   Response: Your concerns are valid. Things don't always seem as simple when the soup gets stirred. That is when sound judgment and experience is required to minimize risk because after all, you have to do something, right?  I would look at the results of pricing both ways as follows..

Inquiry: So Paul, are government accounting system requirements only applicable for Cost Reimbursement Type Contracts?  Response: This is a widely misunderstood concept. Many contractors feel that they do not have to worry about audits since they do not have any cost plus fixed fee (CPFF) type contracts. Others feel that since their contract(s) are small they are okay. Boy do they find out the hard way that this is not true. Let me tell you how it generally works.  Hold on to your hats' because this is High Value guidance coming, and it's free...

“Truly the light is sweet, and a pleasant thing it is for the eyes to behold the sun” Ecclesiastes 11:7

Here is some interesting information I hope should get you outside a little more, even in the winter!

Satan called a worldwide convention.  In his address to his evil angels, he said, “We can’t keep Christians from going to church.  We can’t keep them from reading their Bibles and knowing the truth.  We can’t even keep them from conservative values.  But we can do something else.  We can keep them from forming an intimate, abiding experience in Christ.  If they gain that connection with Jesus, our power over them is broken.

Paul, in setting up accounting systems, I always recommend that the company have a lag between the timesheet cutoff date and the payday, so that the employee’s hours can be collected and paid based on timesheets.  However, if a company chooses to keeps its payday, and if all their employees are salaried, are they technically forecasting time.  Example, they have to send payroll data on Friday, August 10 for hours thru August 15th.  So to me, they are forecasting Monday Aug 13 to Wednesday August 15.

Paul, can you address the impact on our contractor work force of the Executive Order issued on 21 Dec which I believe declared the 24th of December a National Holiday. Government was very unclear and fractious on how contractor work force and contractors should deal with this "holiday."

For several years now, many contractors have objected to the DCAA requiring the use of the Incurred Cost Electronic (ICE) model to submit what the DCAA considered an adequate incurred cost submission (ICS). Those complaints can now be directed towards the FAR Councils because, in FAC 2005-52, effective June 11, 2011, they have incorporated the ICE model into the Allowable Cost and Payment clause, FAR 52.216-7

Before discussing the changes made by the FAC, a few words about 52.216-7 are in order. That clause is the only FAR clause that requires submission of an ICS. Thus, if 52.216-7, or a non-standard clause requiring the submission of an ICS, is not in a contract, the contractor has no obligation to submit an ICS.

We have passed the $1B threshold - Over 30 years supporting member firms, clients, and workshop attendees in winning new contracts, extending/renewing existing contracts, preventing loss of contracts, and cost savings through negotiations and audits.

What one disabled veteran wanted to say about the DVD and how it helped him and his firm.