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FLGOVCON48- Indirect Rates for Cost Plus Contracting

In this episode Jenny Clark talks about Indirect Rates for Cost Plus Contracting.

Cost Plus Contracting

1.What is Different About Cost Plus Contracting?

2.What additional pricing and reporting may be required?

3.What are typical Billing Formats?

4.How do we settle our Provisional and Actual Indirect Rates?

5.How are Indirect Rates Calculated (simplified version)?

Cost Plus Contracting

  • More Advanced Contracting Method
  • Shared Risk – scope broadly defined
  • Program or Personnel Oriented, R&D
  • Longer Term
  • > 3 Years
  • Base plus Option Years
  • Service Contract Act
  • Incurred Cost Submission
  • Flow-downs to Subcontractors

More Complex Pricing/Systems

  • Required to show your Indirect Rate Calculation
    • Based on your Income Statement
    • Indirect Costs expresses as % of Direct Labor and Other Costs
    • History and Projections
    • Frequently must show several years of projections in proposal
    • Do not share with your PRIME Contractors or TEAMMATES
  • DCAA SF1408 PreAward Survey requested by Contracting Officer

Cost Plus Contracting


  • USUALLY Longer Term
  • Reimbursed for all ALLOWABLE Costs
  • Fee usually 6% to 8%
  • Generally can count on the profit, unless OVERRUN
  • PRIME Cost Plus mark of Maturity


  • More complex billing
  • More complex cost tracking
  • Indirect rate management CRITICAL
  • Must complete Incurred Cost Submission

Contract Value & Funding

  • Typically Contract Line Items (CLINS)
  • Task Orders or Delivery Orders
  • Customer May Demand Additional Reporting
  • Initial Contract with Ceiling Established
  • Ceiling is POTENTIAL, not Authorized
  • Broken down into:
    • Cost $100,000
    • Fee 6,000
    • TOTAL $106,000

Contract Value vs Contract Funding

  • Base year
    • Cost $5,000,000
    • Fee 300,000
    • Total $5,300,000
  • Funding Mod
    • Cost $1,000,000
    • Fee 60, 000
    • Total $1,060,000

Cost Plus Contracting

  • Reimbursed for:
    • Direct Labor
    • Direct NonLabor (Travel, Materials, Subcontracts, etc.)
    • Indirect Rates: Fringe, Overhead, G&A
    • Fee%
  • Indirect Rates
    • Provisional Billing Rates (submit to DCAA)
    • Actual Unaudited Rates
    • Audited, Approved Rates

Cost Plus requires Incurred Cost Submission

  • 52.216-7  FAR Allowable Cost and Payment Clause
  • Created the requirement for an Incurred Cost Submission (ICS)
  • Also called ICE (Incurred Cost Electronically) – dcaa.mil
  • Large, complex set of spreadsheets proving your allowable costs and indirect rates, reconciled to billing
  • Due six months after close of fiscal year
  • Subject to audit – about 5 years behind
  • MINIMUM of 40 hours to complete – over 20 Worksheets!

To contact Jenny W Clark

CEO, Solvability, Inc




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