Jump to content

Invoicing Consumables


Recommended Posts

I administer a CPFF contract with consumable materials. The contractor invoices monthly for the consumable material. My question is: When does the contractor incur the costs? Is it when the Government receives/accepts the material or when the contractor provides evidence that payment has been made to the subcontractor? I believe it's ok for the Government to pay for consumables before the prime pays his subs IAW FAR 52.216-7, Allowable Cost and Payment.

Link to comment
Share on other sites

My question is: When does the contractor incur the costs? Is it when the Government receives/accepts the material or when the contractor provides evidence that payment has been made to the subcontractor? I believe it's ok for the Government to pay for consumables before the prime pays his subs IAW FAR 52.216-7, Allowable Cost and Payment.

Hi doc4243,

You don't tell us whether or not your contractor is CAS-covered or whether it has a Disclosure Statement. That would have been helpful, but your question can still be answered.

1. The contractor incurs a cost when the cost is recorded on its books. It's that simple.

2. The contractor records a cost on its books based on its established practice, which it is supposed to follow consistently. Not all contractors follow the same practice. Some record a cost when they receive an invoice, others when that invoice is paid. Still others 30 days after parts are received without the need for an invoice. It's all different. But the key point is that the contractor should have a written policy that explains its practice. Ideally this would be the Disclosure Statement. But since not all contractors are CAS-covered to the extent of having to submit a D.S. then a written policy should be sufficient.

To your last point, yes. The FAR is permissive regarding the idea that a contractor might "incur" (i.e., "record") an expense prior to actually paying it. It's called "accrual accounting" and is an integral part of Generally Accepted Accounting Pratices (GAAP). The fundamental requirement is that the payment must be made in the normal course of business.

One final, nitpicky point. I'm not sure how (or even if) the Government could "receive/accept" the material because you specified the material is consumable. "Consumable" means, pretty much by definition, that it's consumed during production and never shows up as a separate deliverable.

Hope this helps.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...