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sakowitzm

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  1. Thanks again for the discussion. I continue to learn. As is obvious by now, I am not an accountant nor a contracts person, nor do I play either of the above on TV. If we may, let's go back to the original question. The consensus of the answers is that Company X is fully entitled to bid rates that do not fully account for their costs. So let me re-arrange the question just a bit. Company X develops T&M bid rates, and then analyzes those rates against other existing contracts with the same customer. That analysis shows that Company X could easily raise their bid rates 20% and likely still win the contract. So this they do. They simply multiply all rates by 20%, submit their proposal, and win the contract. Has Company X done anything wrong?
  2. Thank you all for the discussion. Vern Edwards: You are correct ? Company X does not recover all of their indirect costs, due to the fact that they slashed the T&M rates they bid, in order to win the contract. Woops85: It was not my intent to suggest that Company X would try to recover last year?s costs through higher rates. ?Last year? is done and gone. My question was this. For the coming year, when preparing their provisional rates, the T&M revenue would only cover less than half of indirect costs; let?s say 40%. We know that if Company X proposes the same fringe, overhead, and G&A as last year, then their cost-type revenue with the Army would recover 50% of their costs. So would not/could not/should not Company X seek to raise their fringe, overhead, and G&A for the coming year, so that their cost-type revenue with the Army would recover the 60% not covered by the T&M revenue with the Navy? (Putting aside the negative ramifications of raising one?s rates substantially.) There would not be an issue of ?justifying? the higher rates ? the costs are real, and the T&M and cost-type contracts are in place. Isn?t Company X entitled to set their rates at an appropriate level so that they recover all of their costs? And thus, if this happens, the cost-type contracts with the Army would be subsidizing the T&M contract with the Navy??? TIA for your continued insights.
  3. Company X, a small business, is eager to win an award on a T&M ID/IQ contract with an element of the Navy. Using industry-accepted salary survey data and their actual burden rates for fringe, overhead, and G&A, Company X develops their labor category rates for this bid. On review, they discover that when compared to other T&M contracts that this element of the Navy has let, Company X?s rates are 20% higher. In a desire to be competitive and win the single-award contract, Company X simply reduces their rates by 20% across the board. They do not have any "backup" that would show how they developed the submitted rates. Company X submits their proposal without any explanation of how they developed their rates, and wins the award. Question 1. Has Company X done anything wrong? Question 2. If Company X has done something wrong, what exactly have they done wrong? Question 3. How will the Government come to learn that Company X has done something wrong? Question 4. Following submission of proposals, and prior to award, is the Government allowed to require Company X to explain how they derived their rates? Is the Government allowed to do so following award? Question 5. Suppose Company X has done nothing wrong. They have a great deal of success on the new contract, and a year later their revenue is now split ? 50% comes from cost-type contracts with the Army and 50% comes from this T&M ID/IQ with an element of the Navy. Since their bid rates on the T&M contract do not cover their actual costs for fringe, overhead, and G&A, Company X substantially raises their burden rates the following year. Moving forward, Company X?s Army contracts are now subsidizing Company X?s Navy contract. Is this a valid conclusion? Is this fair?
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