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  • Question

    Can a contractor on-board contractor employees at a higher rate than proposed and deem the higher rate as allowable incurred cost to the government (i.e., the proposed fully burdened hourly labor rate (including profit) for an Applications Systems Analyst - Senior is $84.24 but the contractor on boards the Applications Systems Analyst - Senior on the task order at $100.50, etc.)? Is the contractor permissible to do so and consider the rate of $100.50 an allowable incurred cost to the government? And now in stead of the government paying the hourly rate of $84.24 as proposed, the government now has to pay a hour rate of $100.50. Is this permissible or not under a CPFF CLIN? Thank you.


    Answer

    FAR 16.301-1 states: "Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract." So the question becomes: Are costs associated with the higher rate allowable? FAR 31.201-2 (Determining allowability) lists five criteria that must be met. One of those is "Terms of the contract." Is the rate for an "Applications Systems Analyst - Senior" specified at $84.24 in the contract? If the rate is set in the contract without an allowance for escalation, then payment at a rate higher than $84.24 does not meet the "Terms of the contract" criterion. If there is a compelling reason for the contracting officer to approve the higher rate, it must be done via contract modification. The contractor cannot move the goal post without valid justification and the concurrence of the contracting officer.

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