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  • Question

    Does target cost include or exclude FCCOM (COM) for the calculation of ceiling price?


    Answer

    COM is an allowable charge for a contractor to bill the government provided the contract language explicitly indicates the contractor will use COM.

    So, it is part of the calculation for total price.  However, the contractor should not get fee or profit based on COM dollars.  

    In other words, if applying a percentage to "all costs" you would not include COM in the base that the percentage is applied upon.  However COM is a Cost that a Contractor can get reimbursed for so you need to add that back into the value to get your final answer.

    To make an oversimplified math equation:

    Total Price = COM +((allowable costs - COM)* Percentage).  Do not construe this equation as complete and eternally correct, it was only put together in the context of Cost of Money and your question.

    There are, of course, may be exceptions in contract language and/or DFARs clauses invoked; therefore you should contact your programs Contracting office to ensure you correctly grasp the applicable language.

    Update: when using WGL Target Cost does not include FCCOM. The WGL uses a different calculation to provide additional profit as an incentive if the contractor proposes FCCOM. One exception is if you are going to do an Incentive contract (i.e. CPIF, FPIF etc.) In that instance FCCOM is included in Target Cost, see DFARS 215.404-71-4(d)(1)(i)

    SIncerely,
     

     

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