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    When I dig into their spreadsheet, I see that they have started with the SCA WD hourly wage rate, then added the Health & Welfare rate, then applied a 25% fringe rate (which would be reasonable for the industry) to the total of the salary + H&W, then applied Labor OH, G&A, and profit. My understanding is that employers can use a fringe rate in lieu of the H&W value, if they like, as long as employees are getting at least the H&W rate. But if they do, that is in lieu of the H&W rate, not in addition... correct? Especially since the H&W is added so early in the calculation process, this has resulted in a significant increase in the hourly rate they are charging. Even if the contractor's cost estimator did this in good faith (because they spaced out that H&W is fringe and that therefore both adding H&W and applying the industry-standard fringe rate is double-charging), it would still be an estimating error correct?? Or if they did it intentionally it would be, er, improper to say the least?


    Answer

    From reading the background information in your question, I can understand your concern about possibly being  double charged, but I do not have enough information to provide a definitive answer.  For one thing, I am unfamiliar with the contractor's standard accounting procedures and practices such as how they classify, group and accumulate their indirect costs including what costs are included in the fringe rate.  I recommend contacting your cognizant DCMA office to see if they have any information about this company's accounting practices and rates.  DCMA hopefully can help you find out (if they don't already know) what costs are included in their fringe, and they probably would be able to review their fully burdened labor rate to determine if it's structured properly.  Another option is to contact your Region's DOL Labor Advisor who can verify the rates are from the most current wage determination and may even be able advise if the contractor has applied the fringe and H&W correctly in their labor rate.

     

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