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  • Question

    Can a contractor use both a daily rate and a percentage rate depending on the contract? Can he choose the daily rate method on the first two contracts and choose the percentage rate method on the third contract? Or does he have to choose one method and use that on all three of his contracts?


    Answer

    Do the contracts include the clauses at FAR 52.230-2, Cost Accounting Standards, and FAR 52.230-3, Disclosure and Consistency of Cost Accounting Practices? If so, then treatment of overhead must be consistent across all the contracts. If the contracts are not subject to Cost Accounting Standards, generally speaking I know of no requirement for the same method to be applied consistently across contracts.

    HOWEVER, I also know of no reason for a daily overhead rate to be intentionally applied to a contract, aside from a work stoppage situation (reference the Eichleay Formula). Doing so would disassociate the absorption of overhead costs from their direct cost drivers, and is not permitted aside from work stoppage situations (where the Eichleay Formula would apply).

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