For a multiyear contract (my requirements contract, 3 years) how often should the wage determination be updated?
Is the same wage determination used for the entire life of the contract?
Is the wage determination each year?
is the wage determination updated of each task order?
This response is based on the information provided. We suggest you discuss with your contracting team, program manager and/or legal department as appropriate.
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The primary key to this question is, "what are the established practices of the company in question?" We would find this answer in the company's disclosure statement if it is required to have one. Otherwise we would look for company policies and practices to determine if this is the normal way it conducts these types of intercompany transactions.
Under full CAS covered contracts, the two primary standards are CAS 403 (Allocation of home office expenses to segments) and CAS 410 (Allocation of business unit general and administrative [G&A] expenses to final cost objectives); however, in the case of modified CAS coverage neither of these standards apply.
We cannot in this space completely address all aspects of a full CAS covered contract. But it is instructive to note that full coverage applies to contractor business units that --
(1) Receive a single CAS-covered contract award of $50 million or more; or
(2) Received $50 million or more in net CAS-covered awards during its preceding cost accounting period. (FAR Appendix 1: 9903.201-2, Types of CAS coverage) We understand your concerns to be:
1) is the prime performing segment of a company permitted to apply G&A to an intercompany transfer of a commercial item from a different segment of the same company and
2) if permissible, would doing so generate double counting of home office allocations.
Under full CAS covered contracts CAS 410 addresses permitted categories of allocation bases ; this is applicable to the first issue of applying G&A to the transferred item(s). CAS 410 lists three categories for use in allocating a business unit G&A expenses - 1. Total Cost Input (TCI), 2. Value-added (VA), and 3. Single element.
The method used by the contractor should be consistently applied and shall be described in the disclosure statement (when a disclosure statement is required). Since CAS 410 does not specifically prohibit the inclusion of intercompany commercial transfers within the G&A base, the permissibility of allocating costs in that method will hinge on the contractor's disclosed practice. Also, per FAR 31.203(d) "...once an appropriate base for allocating indirect costs has been accepted, the contractor shall not fragment the base by removing individual elements;" thus, if the contractor's established/disclosed practice is to include intercompany commercial transfers in the G&A base, the contractor cannot remove those costs for allocation.
Regarding the concern of double counting, again if full CAS coverage applies, the contractor will have to follow CAS 403 for the allocation of home office expenses. There are two concerns. As long as the contractor is correctly allocating the costs in accordance with CAS 403, allocation of G&A by the receiving segment will not generate a double counting issue. As CAS states in CAS 402-20, "(d)ouble counting occurs most commonly when cost items are allocated directly to a cost objective without eliminating like cost items from indirect cost pools which are allocated to that cost objective." Under the allocation of home office expenses in CAS 403-40(a)(2) it is required that "(n)o segment shall have allocated to it as an indirect cost, either through a homogeneous expense pool, or the residual expense pool, any cost, if other costs incurred for the same purpose have been allocated directly to that or any other segment." Thus, proper application of CAS 403 will ensure no double counting of the home office expenses from the home office to the individual segments. The second concern boils down to, "Will applying receiving segment G&A to an item that already has the G&A burden from the transferring segment create a double counting issue?" Yes, the contract may be bearing a share of home office allocation from both segment's G&A allocations - but as previously discussed, there is no CAS prohibition on that method of G&A allocation. As long as the home office is correctly applying CAS 403 and the segments are correctly allocating the G&A rates utilizing their established/disclosed practices, there is no FAR/CAS issue. The final cost objective is receiving benefit from the transferring segment's G&A activity and the receiving segment's G&A activity.