Corduroy Frog

Thanks - I didn't know the awarded contract could be available under FOIA. Thanks also for not offerring that I'm making math errors. I am not. I might be making errors in my approach.

I have been underbid three times this summer, which shouldn't raise any eyebrows. But all of these have WD released with Labor Categories defined, and fringes defined as well. The FTE requirements were such that bidding fewer people would have been next to impossible - in fact one of these was a defined hours level-of-effort. And I have been underbid 25-30%. The winner has to bid the same WD wages and fringes as I do, and there is no wiggle room for FTEs. Indirects do exist but are not high enough to warrant this kind of difference. Any idears about how this is happening? My stacking and math are quite accurate, please take this possibility off the table.

Joel, the captioned quote was from me. A more accurate statement might be: "Unallowable costs are not chargeable to either a G&A pool or an Overhead Pool." Regards, Corduroy Frog

Vern, this is exactly what I'm going to do. This overblown bloviating of a discussion is exactly what I wanted to avoid when I preferred simple answers, and I was even criticized for that. Of course, almost nothing has a simple answer, but in the evaluation of options available to you at the time, you appreciate clarity - not a cesspool of uncertainty in which to wade around. You guys spend as much time feuding with yourselves as you do feuding with me. I'm surprised for accomplished experts that you have so much time on your hands. I would, however, extend appreciation for those posts that appeared to be a bona fide effort to help.

Thanks for your post Joel. I mentioned examples of activities which all companies engage, and the general consensus is that all of these activities are not even allowable at all. Unallowable means neither G&A nor Overhead. I have not extended the FAR definition of "advertising and promotion" to include business development activities such as examining the FBO, schmoozing the customer, knocking on doors, consulting with existing contracting officers to acquire additional scope, etc. All companies do this kind of stuff. Am I to believe these kinds of activities are unallowable under the mindset of advertising and promotion?

Vern, you did give me what I asked for. If I can get straight up answers I can put up with the acerbity. Thanks.

Thanks to all who have responded. Vern Edwards, despite his legendary acerbity, really cut through all this with a single one-word answer. Activities include such things as daily filtering and examination of the FBO, knocking-on-doors with customers, consulting with contracting officers in an attempt to expand scope of work. Travel to customers, meals and meetings to schmooze relations with customers, meeting with team members, etc. Not nearly big enough for CAS to apply. Does NOT include site surveys after an RFP has been released, or any proposal costs.

Is there no definitive answer to the above? "Here_2_help" has a great history of helping with questions, but this time can anyone derive an answer from the above? Maybe the problem is me, in assuming that there would be a widely-held view that prefers one over the other. I am currently involved in a feud between a party who believes this stuff should be G&A, and another who believes this should be Overhead. Maybe, as Here_2_help says, there is no conclusive answer.

We're all familiar with this, although perhaps under different names. Most of us know advertising is unallowable, but the unallowable nature is sometimes attempted to apply to Marketing. There is Marketing Research, Market Development, Business Development, etc. that is completely allowable and expected. Membership in a local chamber of commerce is not unallowable. Printing of capabilities brochures is not unallowable. My question regards "Business Development" or whatever name you know. Expenditures for business development, including labor, travel, etc. is most commonly charged as: G&A Expense Overhead Expense This is a general question with general answers expected. Some large contractors may form elaborate service centers which encompass some or part of the above, but I'm hoping for general answers. The question, if not otherwise clearly stated, is "which pool are business development costs normally charged to - G&A or Overhead?" Thanks in advance...

Thank you.

I believe the proper way to price is to enter data at the lowest level of detail, and allow it to perculate up to a final bid price. Managers and owners often have a problem with this -- they seem to find a "top-down" approach preferable. They don't want to go to the trouble to provide low-level data, and are totally in love with the price they think will work. Often their instruction to underlings is to "find a way to make it work" when it is simple as their numbers just won't work - 2+2=5 syndrome. I have a customer who takes my pricing and waltzes off into a delusional sunset by "playing" with numbers, and I am about to quit since I have other work to keep me busy and don't really need the money. These fictional prices are accompanied with a narrative which says: "ABC follows a pricing model based on rates resulting from a submission of 5-year plan coupled with the effect of an award" DCAA would crucify their "top-down" practices if they ever checked in - but in recent years DCAA has just about quit fooling with smaller contractors. I don't know that I can forge a question from the above, but I would like to hear from some of you as to whether this is normal and what you do about it. Comments welcomed.

Thanks to all. The last two posts have answered my questions and the foregoing conversations were helpful as well. Best regards, Corduroy Frog

Sorry, Vern, I don't have it because right now we are being approached verbally. I think when the threshold statement becomes available, it will be extremely revelant, and may answer some of the questions. I'll quote it when I see it - or maybe it will be in the form of a FAR clause. Thanks, Corduroy Frog

Of course not. I didn't regard the matter of spelling germane enough to the conversation to make a difference. So far, the forum is 0-2 in answering any questions. I thought this was the purpose of this site.

You mention "simplified acquisition threshold." That might be what I'm asking about. I did read the FAR clause which assures that the contractor performance must exceed 50% if "above" the threshold. Also learned that I may have misspelled "contractual". Appreciate your response, but from where I am in my knowledge base, none of the three questions have been answered. The specific questions for conversations are: What is the current threshold? Does the threshold apply to a single year or the total contract value? If there is a FAR Clause which determines this? (So I can keep up with it if it changes) Can you help with any of these?

Yes, contractural threshold - of which there are many. This specific threshold deals with a threshold whose excess will prevent a contractor from using primarily non-employees to deliver. Under the threshold, a contractor may use a subcontractor or consultant entirely instead of using their own employees. At one time I understood the threshold to be $150,000. The specific questions for conversations are: What is the current threshold? Does the threshold apply to a single year or the total contract value? If there is a FAR Clause which determines this? (So I can keep up with it if it changes) Most of you probably have easy answers to the above as applies in most cases. Not asking about remote circumstances which will scarcely be encountered by a small contractor. Thanks in advance, Corduroy Frog

Regardless of what contract type, a separate CLIN for travel can exist, and can be charged at the direction of the customer. And the CLIN will be cost-reimbursable. To my knowledge, these Travel CLINs have never allowed Fee to be applied, but conventionally, G&A could be applied to the reimbursable approved cost of travel. In recent years, certain DoD contracts are insisting that G&A can no longer be applied. This concept seems to be immensely popular and spreading like wildfire. Government is going after this idea like a pig after slop. Imagine - no delay in DCAA approval of incurred cost of G&A, not to mention the cost savings to begin with. They should be deliriously happy. I can understand if this is put into a contract, but the fact remains that administration of travel is arguably the most cumbersome and time-consuming things that a staff can do. For the government not to at least reimburse G&A is not fair. Is it common for contractors to compensate for this by adding about a 1/2 of one percent to the fee?

Thanks for the discussion. I can answer for the tax ramifications: so long as the rebates are treated as income (most likely "Other Income" on a profit & loss statement), the IRS will be happy. In the case of "points" (or frequent flyer miles), as long as the applied expense is reduced, the IRS will be happy too. Appreciate all the fine points of discussion. Suffice it to say that unless a cost-reimbursable contract or CLIN is involved, the pursuit of application to reducing cost is really a dead-end street.

A company receives several hundred $ in promotional credit card rebates every month. The rebate approaches 1% of the entire bill. Which of the following describes the best treatment? The company must allocate the rebate proportionately over all charge numbers during the monthly billing period. The company may simply put the cash in the bank and not allocate to anything. The company may let the cash accumulate, and apply it to a free airline ticket at some point. They have to allocate the credit to the charge number of the airline ticket. Does the answer to any of the above change if some of the charges are for a cost-type contract?

Looking for a Low-Cost screening software to identify opportunities. The standard-bearer is believed to be GovWin, by Deltek. We cannot spend $5- $6000 to spend on this Cadillac product. We're looking for an affordable "Chevy" product. Something better than waiting on .fbo but stopping short of GovWin. Ready to listen to alternatives and what features they possess.

Thanks Pepe for this rousing display of support.

I have heard there is a FAR clause that regulates this, but I don't know what it is, or if it even exists. The purported clause limits the amount of profit a company can make on a contract - as a percentage of the work. I've heard the percentage varies with the contract type - cost plus/ T&M/ Fixed price. I have heard the profit for Fixed price is limited to 30%. Fee is calculated as a percentage of cost, not percentage of the selling price. Example: Fixed price contract has $25,000 in direct cost plus another $20,000 in fringe/overhead/ganda for a total cost of $45,000. Revenue on the contract is $75,000 meaning the Fee (or profit) is $30,000. Since $30,000 is 67% of $45,000, if the FAR ceiling is 30%, then profit would be limited to $13,500. Under this purported FAR clause the contractor would have to give $16,500 back to the government. Is there such a FAR clause that limits profit? If so, have I applied it correctly? Does such a FAR clause have to be "invoked" upon the contract to be effective?

It is (apparently) not the intent of the government to pay for rfp bid & proposal costs. Many rfp's state so. At issue is a small $28K bid. The "margin", including Fee and overstated OH and G&A, amounts to some $7000. Since the anticipated OH and G&A are nebulous and not as "free" as often purported, we think the absolute most the company can realize out of this small bid is only $7000. As you must realize, the size of this effort is tiny in the spectrum of contracts. However, meeting the requirements of the rfp requires much intensive effort, likely to be $8,000. It is obvious to us that the rfp was not written for this small effort, but is probably the result of some overdeveloped government boilerplate. The scope of work (PWS) is only four pages long, and is the only thing which matches the small effort. The remainder of the rfp is some 59 pages long, and contains trivial detailed instructions causing the production of the response to be unduly expensive. And of course, the government doesn't want to pay for any of this. We have a five-year forwarding averaging plan on file with DCAA, but this effort doesn't go beyond year 1. One idea I had was to increase the annualized G&A by an estimated $8000 in B&P cost, thus spreading the cost over several bids, or better yet, focusing to this one bid by adding a few percentage points to our bid G&A rate. Great numbers in the idea, but does this not effectively cause the government to pay extra because of an inflated G&A rate? The contract will be fixed-price, so the G&A/OH rates are static and not reimbursable once established. Question: Is this situation so stark that the company is left with no alternative except to absorb the B&P cost, and effectively perform the contract for nothing?

Good recommendations, Mr. Edwards. I guess I did not realize how much of a beginner I was, and will try out the beginner forum for my next question. I am not quite the neophyte in the area of preparing pricing, but I have quite a bit to learn about strategy, and what is allowed and what is not. I am much ill-informed when it comes to contracts. I will be on the beginner's forum before the evening is over.