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    When Congressional Directed Funds are used for a SBIR/STTR R&D effort are there any known ways that we can mitigate the costs of Final Indirect Rates later charged to the Requiring Activities core funds?


    Answer

    Question came from contracting shop. Shop's customer gets congressionally earmarked funds for a specific small business program. Because contract will be cost reimbursement plus fixed fee customer is concerned about source of funding if the contractor's indirect rates take the value of the contract over the award amount, the amount of the earmark. This happened before and customer had to pay the increased rates from its core funds. [aside: the customer neither needs nor wants the work congress is ordering, so it was unhappy about having to pay for the rate increase. Earmark is around $2.1M of RDT&E funds. I offered three possible paths:
    1. Award the full amount. If rates go up, ask Congress for the $. With the last overage, the customer determined it was too hard to take it to Congress. It sucked up the overage.
    2. Put a rate ceiling in the contract, capping at the originally negotiated rates. But also put in a rate floor that customer would pay if the rates went down below the floor. This opportunity to make more $ would give contractor incentive to agree to the ceiling.
    3. Make the award for ~1.9M, then use the $200K to cover any rate changes. As contract executes, if the rates keep to original rates, release some of the holdback, e.g., at 50% of PoP, obligate 50% of the holdback.


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