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  • Question

    Are Contractor Purchased Vehicles included in Indirect Costs and reimbursable or must is be included in there overhead?


    Answer

    Your scenario is that you have a Firm Fixed Price Base Operations contract whereby a newly awarded contractor purchased the prior contractor's vehicles for continued use on the current award. The contract contains a $200,000.00 CLIN for supplies, equipment, and materiel. Now the current awardee has submitted an invoice containing costs of the used vehicles. The contractor has been informed that vehicles are not an allowable direct cost. However, the contractor disagreed and has stated they will submit a Request For Equitable Adjustment to be paid for the used vehicles. The only Government Furnished Property on the contract is for tools--No vehicles.

    Ans: FAR 22.1003-5(k) seems to refer to vehicles as equipment and your Contract Line Item Number(CLIN) and specification provides for supplies, equipment, and materiel. However, vehicles were not excluded. 

    If the Government pays directly for the vehicles, who would own them at the conclusion of the contract. Why would the Government want to own these used vehicles? Was the Government's specification clear as to the types of equipment that could be paid for under your "supplies, equipment, and materiel CLIN?" Can the current contractor use these vehicles in the performance of other Contracts?  This billing issue has the potential for a dispute and I suggest that you contact your legal staff for guidance.

    All being said, it is my belief that the contractor shouldn't invoice the cost of these vehicles as a direct cost but should include their depreciation in an overhead pool. Again, seek legal guidance.

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