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    Is it allowable for the contractor to apply fee and indirect cost to ODC's . For example, can a contractor apply G&A and fee to ODC's proposed. Where can we find this in the FAR.


    1. The DFARS and 48 CFR Chapter 99 references quoted below in pertinent part are applicable to this response.

    DFARS PGI 253.215-70 -- DD Form 1547, Record of Weighted Guidelines Application
    (c) Specific instructions for completion of DD Form 1547.
      (13)  BLOCKS 13 through 20--COST CATEGORY OBJECTIVE.  Enter the pre-negotiation objectives.  Include contractor independent research and development/bid and proposal in the general and administrative expenses in Block 19.

    Note: A copy of the DD Form 1547 can be found at this link.

    48 CFR – Federal Acquisition Regulations System
    Chapter 99 – “Cost Accounting Standards”
    9904.410–40 – Fundamental requirement
    (b)(1) The G&A expense pool of a business unit for a cost accounting period shall be allocated to final cost objectives of that cost accounting period by means of a cost input base representing the total activity of the business unit. The cost in put base selected shall be the one which best represents the total activity of a typical cost accounting period.
    9904.410–50 – Techniques for application
    (d) The cost input base used to allocate the G&A expense pool shall include all significant elements of that cost input which represent the total activity of the business unit. The cost input base selected to represent the total activity of a business unit during a cost accounting period may be: Total cost input; value-added cost input; or single element cost input. The determination of which cost input base best
    represents the total activity of a business unit must be judged on the basis of the circumstances of each business unit.
      (1) A total cost input base is generally acceptable as an appropriate measure of the total activity of a business unit.
      (2) Value-added cost input shall be used as an allocation base where inclusion of material and subcontract costs would significantly distort the allocation of the G&A expense pool in relation to the benefits received, and where costs other than direct labor are significant measures of total activity. A value-added cost input base is total cost input less material and subcontract costs.
      (3) A single element cost input base; e.g., direct labor hours or direct labor dollars, which represents the total activity of a business unit may be used to allocate the G&A expense pool where it produces equitable results.

    2. As indicated on the DD Form 1547, DoD’s Profit Policy provides for the application of profit or fee to "other direct costs" (ODC). A review of the form shows that Government’s objective for “Other Direct Costs” is inserted into Block 17 of the form, which in turn roles up into the Government’s objective for “Total Costs” in Block 20. Four of the five factors used to calculate the Government’s “Profit Objective” (i.e., Performance Risk, Contract Type Risk, Working Capital Adjustment, and Cost Efficiency Factor) use the “Total Costs” amount in Block 20 as the base for calculating profit or fee.

    3. The application of G&A to “other direct costs” (ODC) depends upon the contractor’s accounting system. The two most prevalent accounting techniques used by industry are “total cost input” and “value-added cost input”. As set forth in the Cost Accounting Standards (CAS) regulations described above, G&A is applied to ODC if the contractor is using the total cost input technique. If the contractor is using the value-added cost input technique, then any “subcontract” or “material” costs that might be included in proposed ODC would be excluded from the application of G&A to such costs. If the contractor in question happens to be using the “single element cost input” technique to allocate G&A costs (not common), then G&A would not be applied to any ODC.

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