Cost Allowability
Cost Estimating – Stepping Up the Game from Business System Rule to Shay Assad
Shay Assad , Director, Defense Pricing, Department of Defense, was the keynote speaker at the NCMA 2012 Aerospace and Defense Conference in Austin, Texas. He indicated that contractors were going to be asked to provide more information about costs when bidding on contracts. In his words, “The reality is we’re stepping up the game”. This emphasizes the contractors need for a formal cost estimating process to be used consistently in the preparation of cost proposals. The requirements of such a system are defined in the final business systems rule that was first published as an interim rule last year and documented as a final rule just this month.. Read More.
Identifying Unallowable Costs – Marketing vs. Direct Selling Expenses
How many of you exclude your entire “Marketing/Sales Department” expenses from your allocation of indirect costs assuming that they are 100% unallowable? An understanding of marketing vs. direct selling expense and a very simple method of identification or those expenses that are allowable has saved our clients considerable amounts of money previously identified as unallowable. First, we need to understand the difference between marketing and direct selling. As defined in FAR 31.205-38, direct selling encompasses all efforts to induce a particular customer or group of customers to purchase a particular product or service. It is characterized by person-to-person contact including. Read More.
Contract Changes and Terminations – A Consequence of the Times
This week, CB&H and Wiley Rein presented a joint seminar entitled “Contract Changes and Terminations – A Consequence of the Times.” Many of the attendees either had a termination notice in hand or were concerned that one or more of their programs were in jeopardy of either termination or cut-back due to the current budget crisis. The importance of the Request for Equitable Adjustment (REA) in maximizing cost recovery made necessary by contract performance changes as well as resulting terminations were also discussed. Some of the key points discussed during the two-hour presentation included:
Salary Reimbursement Caps – An Attempt to Balance the Budget
Last month, various members of Congress picked up on the September recommendation of President Obama to restrict the amount of contractor employee wages that can be passed on to the federal government for reimbursement. Compensation of the top five management-level employees is already benchmarked at $693,951 and compensation for all other contractor employees is governed by DCAA’s assessment of reasonableness. Current proposals would limit all compensation reimbursement for all employees to a maximum of $200,000 to match the most senior federal employee’s salary. Since contractors may not be able to recover all of their employees’ salaries, the differential may come. Read More.
FAC 2005-52 Amends FAR to Include Guidance on Adequate Incurred Cost Submissions
For several years now, many contractors have objected to DCAA requiring them to utilize the Incurred Cost Electronic or ICE model to submit what DCAA considered an adequate incurred cost submission (ICS) as mandated by FAR 52.216-7 . Those complaints can now be directed towards the FAR Councils because they have, essentially, incorporated the ICE model into the Allowable Cost and Payment clause, FAR 52.216-7. FAC 2005-52 , effective June 11, 2011, included FAR Case 2008-020 as a final rule. This case revises procedures for clearing final audit reports and quick-closeout procedure, and sets forth a description of an adequate final indirect cost rate proposal and supporting. Read More.
Proposed IR&D Reporting Requirement May Limit Recovery
On March 2, 2011, DoD published a proposed change to the DFARS supplemental cost principle on independent research and development (IR&D) costs. Under this proposed rule, contractors that have IR&D projects that generate annual costs in excess of $50,000 will have to report the IR&D projects generating the costs to the Defense Technical Information Center (DTIC) using the DTIC’s online input form and instructions. The inputs must be updated at least annually and when the project is completed. Failure to make these reports will make the costs unallowable. In addition to reporting the projects to DTIC, the contractor must also. Read More.