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When you have a Value-added G&A base because you have an M&S Pool to burden Materials and of course the B&P Labor with OH goes into the G&A pool to be allocated, does the M&S on the B&P Material also go into the G&A Pool? Then leave the remainder of the M&S burden in the G&A base with the other Overhead?

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When you have a Value-added G&A base because you have an M&S Pool to burden Materials and of course the B&P Labor with OH goes into the G&A pool to be allocated, does the M&S on the B&P Material also go into the G&A Pool? Then leave the remainder of the M&S burden in the G&A base with the other Overhead?

WDYMB "M&S Pool"? Does it have a DB?

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When you have a Value-added G&A base because you have an M&S Pool to burden Materials and of course the B&P Labor with OH goes into the G&A pool to be allocated, does the M&S on the B&P Material also go into the G&A Pool? Then leave the remainder of the M&S burden in the G&A base with the other Overhead?

Yes. 31.205-18 generally requires compliance with some (or all) of CAS 420. CAS 420-40(B) states, "The IR&D and B&P project costs shall consist of all allocable costs, except business unit general and administrative expenses."

Hope this helps.

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Guest Vern Edwards

Interesting. This inquiry is remarkably similar to one posted on Linkedin in April 2010:

M&S on B&P?

Since B&P Labor is treated like Direct in the sense that it gets Fringe and Overhead applied and then is added to G&A Pool or allocated on same basis, should B&P Materials & Subs be burdened with M&S? And if so, should that M&S burden be added into G&A Pool?

That seems wrong since M&S burden is included in G&A base.

Most often I have seen B&P labor come from employees who are either normally Direct, OH or G&A. In this case, the contractor has full-time B&P employees in their own departments. So it does not seem appropriate to include these costs in OH or G&A pool expense either.

Clarification added April 26, 2010:

Thanks Nick. I am familiar with CAS 410 and 420 and this is what I was looking for, another interpretation to compare to my own.

1) I agree with your first point,

2) I am not asking if the costs should be included in the base, they can't be if they are included in the M&S base, I asked if they should be included in the G&A Pool and you know they can't be included in the G&A pool and base.

3) Contractor does want their time charged to specific B&P Projects. Contractor does not identify these employees as Direct or G&A, they are 100% B&P in their own Departments which are associated with one of two Overheads each.

I probably should have posted this in a Group for debate/shared interpretations, but greatly

appreciate you input in either modality. Based on the above clarification, what do you say?

Clarification added April 26, 2010:

1) Still have the issue of including in G&A Pool and Base, can't do both.

Clarification added April 27, 2010:

Hi Nick - Thanks for sticking with me on this item. I would not be asking if it was easy. :)

Yes, I'm used to reporting two G&A rates, one with and one without B&P costs in the pool.

Could you please follow through on your thought process below, keeping in mind this is value-added G&A base because there is an M&S Pool, and share your thoughts as they relate to the M&S pool, which is what I'm asking about. Note base difference in CAS410.

Still same two original questions. I think we agree M&S should be applied, but then what? Normally the burdened B&P costs are added to or allocated the same as G&A, but with M&S applied, that changes it from Total Cost to Value-added G&A, where burdened B&P normally goes to the G&A Pool and M&S burden goes to G&A Base, so the remaining question is where do you put the M&S applicable to the B&P - In the G&A Pool or Base?

Trust me I am duly impressed that you have even attempted to answers this question and interestingly no one else has out of all the people here on LinkedIn, which unfortunately is confirmation of my original dilemma, however, I'm hoping you and I can reach conclusion.

Thanks for your time on this. Just to go back to the start, regardless of any of the above, do we both agree that ultimately these costs must be classified as Direct costs, which must receive indirect cost allocations OR be Indirect and be allocated to Direct costs??

Clarification added May 3, 2010:

Nick - Sorry for my delayed response on this, got too busy with that job thing as you know. As always appreciate your input, however, I think I have to disagree with this portion of reply:

CAS410-60©(4) Does NOT seem to be applicable since this is not a Total Cost Input G&A Base, it is a Value-Added G&A Base as indicated by the existence of an M&S Pool, agree?

Posted April 26, 2010 in Government Contracts, Financial Regulation | Closed

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Vern, I thought I would publish one reply to the LinkedIn question to help others better understand the back-n-forth.

CAS 420-40(B) says that "The IR&D and B&P project costs shall consist of all allocable costs, except business unit general and administrative expenses." The Standard goes on to say (at 420-50(a)) that "The IR&D and B&P project costs shall include (1) costs, which if incurred in like circumstances for a final cost objective, would be treated as direct costs of that final cost objective, and (2) the overhead costs of productive activities and other indirect costs related to the project based on the contractor's cost accounting practice or applicable Cost Accounting Standards for allocation of indirect costs." That's the general guidance. To answer your questions more directly -- 1. Should Materials and Subcontractor costs charged to B&P projects be burdened with Material/Subcontractor Overhead? Yes, because the indirect costs are allocable to the B&P projects, so CAS requires you to make the allocation. 2. Should indirect costs (other than G&A expense) allocated to B&P projects be included in the G&A allocation base for the purpose of calculating the G&A expense rate? My answer is yes. I'm relying on the CAS 410 illustration at 410-60?(4) that shows that an IR&D/B&P cost pool shall be treated as part of the total cost input base use to allocate G&A expenses.

Hope this helps.

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Hi Vern - You have an excellent memory and yes it is the exact same question. I have a new client with the same issue and I still don't seem to be able to get a a complete answer. I totally appreciate those who have started an answer but no one seems to be able to get through the end. It seems that suddenly the concept of POOL vs. BASE evaporates. Maybe it is too long and I need to split into two and start in middle.

A) So...Value-added G&A Base with M&S Pool, B&P Material is burdened with M&S...

1) Does the BP Material and its M&S Burden get added to the G&A POOL?

2) Does the remaining portion of the M&S Burden stay in the G&A BASE?

B) Same Value-added G&A Base with M&S Pool, B&P ODC's belong in

1) G&A BASE with other ODC's? OR

2) G&A POOL with other B&P costs?

Interesting. This inquiry is remarkably similar to one posted on Linkedin in April 2010:

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A) So...Value-added G&A Base with M&S Pool, B&P Material is burdened with M&S...

1) Does the BP Material and its M&S Burden get added to the G&A POOL?

2) Does the remaining portion of the M&S Burden stay in the G&A BASE?

B) Same Value-added G&A Base with M&S Pool, B&P ODC's belong in

1) G&A BASE with other ODC's? OR

2) G&A POOL with other B&P costs?

A1) YES but your description is incorrect. The M&S burden is applied to M&S costs in the IR&D/B&P projects. The IR&D and B&P pools are allocated on the same base as G&A. They are not "added to the G&A POOL".

A2) YES

B1) YES. ODCs recorded to IR&D and B&P projects receive the same allocation of indirect costs that they would if recorded to external projects (except G&A, of course). So they must be included in any calculations of indirect allocation bases.

B2) YES. Burdened B&P projects, like burdened IR&D projects, are allocated on the same base as is used to allocate G&A expenses. They are NOT included in the "G&A POOL with other B&P costs".

Are you good to go, now?

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Thank you for the follow-up, halfway there...Clear on A but not on B...

A1) I do understand B&P/IR&D are just allocated on the same basis, just said that way to keep it short.

A2) Thanks, I can do that. I will just override formulas in DCAA ICE Model. Won't be the first time to do.

B2) Same answer as A1. No problem. I agree. But am saying again to be clear and to match DCAA ICE.

B1) Not clear. ODC's are only burdened with G&A. So they either go in G&A/B&P POOL(s) or BASE?

A1) YES but your description is incorrect. The M&S burden is applied to M&S costs in the IR&D/B&P projects. The IR&D and B&P pools are allocated on the same base as G&A. They are not "added to the G&A POOL".

A2) YES

B1) YES. ODCs recorded to IR&D and B&P projects receive the same allocation of indirect costs that they would if recorded to external projects (except G&A, of course). So they must be included in any calculations of indirect allocation bases.

B2) YES. Burdened B&P projects, like burdened IR&D projects, are allocated on the same base as is used to allocate G&A expenses. They are NOT included in the "G&A POOL with other B&P costs".

Are you good to go, now?

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B1) Not clear. ODC's are only burdened with G&A. So they either go in G&A/B&P POOL(s) or BASE?

In your scenario, ODC get burdened with G&A and nothing else. So ODC charged to IR&D / B&P projects don't receive any burden at all, and should not be included in your calculation of the Value-Added Cost Input Base. But ODC charged to external projects would be included in that calculation.

Okay?

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Ok, so not in G&A BASE...then #4 of #4 Last question was...

Do those Unburdened B&P ODC's get included in B&P/G&A Pool (per DCAA ICE format) for allocation on G&A base?

Do you see why I am asking this now?

Yes. The Unburdened B&P ODC's DO get included in the B&P/G&A Pool for allocation to final cost objectives.

I offer no opinion on whether or not that is compliant with the DCAA ICE format. While the ICE Schedules are now mandatory, the MS Excel formulae in the ICE Model are not.

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Yes. The Unburdened B&P ODC's DO get included in the B&P/G&A Pool for allocation to final cost objectives.

I offer no opinion on whether or not that is compliant with the DCAA ICE format. While the ICE Schedules are now mandatory, the MS Excel formulae in the ICE Model are not.

Here, why do you say the ICE Schedules are now mandatory? I don't read the revised 52.216-7 that way. In fact, I interpret the clause to permit the contractor to use its own schedules as long as the data called for by the clause is provided.

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Yes. The Unburdened B&P ODC's DO get included in the B&P/G&A Pool for allocation to final cost objectives.

I offer no opinion on whether or not that is compliant with the DCAA ICE format. While the ICE Schedules are now mandatory, the MS Excel formulae in the ICE Model are not.

Thank you for sticking with me on this. I hope you can see why I was struggling and how ultimately you have to break one rule to comply with another and the DCAA ICE evidently does not consider this scenario, which is not that unusual.

Also wanted to say I love your logo!

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Here, why do you say the ICE Schedules are now mandatory? I don't read the revised 52.216-7 that way. In fact, I interpret the clause to permit the contractor to use its own schedules as long as the data called for by the clause is provided.

Thanks for the help, love your handle too.

No worries on the ICE format, I have been doing these since the Lotus days long before ICE and make many adjustments to accommodate reality and my personal preference and have passed audits every time, I think it is substance over form, especially when the form does not accommodate the scenario. Things that bug me on ICE are not having pool, base and rate on same schedule (B/C) so mine do. Not showing rates on on costs by contract schedule (H) so I add onto mine and schedule (I) A/R does not split over/under billed between cost and fee, so I split but also show total. Add but don't delete.

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Here, why do you say the ICE Schedules are now mandatory? I don't read the revised 52.216-7 that way. In fact, I interpret the clause to permit the contractor to use its own schedules as long as the data called for by the clause is provided.

See 52.216-7(d)(2)(iii), as revised June 2011.

See also the DCAA Incurred Cost Adequacy Checklist (www.dcaa.mil)

While you may be correct that, in theory, it's the substantive information that counts--in practice DCAA expect the exact schedules, with the exact same names, in the exact sequence, as is called-out by the "ICE Model" and the Information for Contractors publication.

There is no appeal from a DCAA auditor determination that a contractor's final indirect rate proposal is inadequate. Better by far to just put the package together using the same names in the same order.

H2H

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Hi Joel - I did not want to not answer you, but I think you saw answer in later post, yes? What is DB=DataBase to me.

Cheers!

Teri

Teri, with all the acronyms - I just couldn't resist. I asked if the M&S Pool has a diving board. B)

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See 52.216-7(d)(2)(iii), as revised June 2011.

See also the DCAA Incurred Cost Adequacy Checklist (www.dcaa.mil)

While you may be correct that, in theory, it's the substantive information that counts--in practice DCAA expect the exact schedules, with the exact same names, in the exact sequence, as is called-out by the "ICE Model" and the Information for Contractors publication.

There is no appeal from a DCAA auditor determination that a contractor's final indirect rate proposal is inadequate. Better by far to just put the package together using the same names in the same order.

H2H

Here, you need to re-read 52.216-7 and the revisions to 42.7. This makes it clear that it is the contracting officer who makes the determination whether an incurred cost submission is adequate. Moreover, the contracting officer can vary the information required by (d)(2)(iii). This would be appropriate, for example, if the contractor has no cost reimbursement contracts, but does have T&M contracts. DCAA has no guidance on how to treat this situation. Further, 52.216-7 does not mention the ICE model or otherwise indicates that the clause incorporates it. Finally, the DCAA checklist is not binding on anyone but DCAA and predates the June 2011 changes to the FAR. DCAA has not issued any public guidance addressing the June 2011 changes.

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Here, you need to re-read 52.216-7 and the revisions to 42.7. This makes it clear that it is the contracting officer who makes the determination whether an incurred cost submission is adequate. Moreover, the contracting officer can vary the information required by (d)(2)(iii). This would be appropriate, for example, if the contractor has no cost reimbursement contracts, but does have T&M contracts. DCAA has no guidance on how to treat this situation. Further, 52.216-7 does not mention the ICE model or otherwise indicates that the clause incorporates it. Finally, the DCAA checklist is not binding on anyone but DCAA and predates the June 2011 changes to the FAR. DCAA has not issued any public guidance addressing the June 2011 changes.

Retreadfed,

You are reading the FAR correctly and making the right points. Points I've made many times until I've given up. Nobody cares. Nobody in DCMA is going to overrule DCAA on this issue.

DCAA determines whether the submission is adequate IN FACT. The ACO simply rubber-stamps the DCAA audit report. Nobody in DCMA is going to take this issue to a Review Board under the Assad "Dispute Resolution" process. (*)

I know that a CO is supposed to exercise independent business judgment. Yeah. Good luck with that. You think I'm exaggerating? Just look how DCMA handled its soon-to-be-infamous-when-the-Boards-and-Courts-get-through-with-it "Contractor Recovery Initiative".

So if DCAA determines that the submission is inadequate, it is going to be inadequate. And good luck appealing the CO's Final Decision. I'm not even sure it's appealable. The contractor would need to demonstrate some injury from a determination that its submission was inadequate ...

H2H

(*) If there is some courageous ACO reading this, and you have (or are willing to) take a DCAA determination that a contractor's final indirect rate proposal is inadequate to a Review Board, then please post here so that I can publicly laud you. You are truly exceptional.

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Retreadfed,

You are reading the FAR correctly and making the right points. Points I've made many times until I've given up. Nobody cares. Nobody in DCMA is going to overrule DCAA on this issue.

DCAA determines whether the submission is adequate IN FACT. The ACO simply rubber-stamps the DCAA audit report. Nobody in DCMA is going to take this issue to a Review Board under the Assad "Dispute Resolution" process. (*)

I know that a CO is supposed to exercise independent business judgment. Yeah. Good luck with that. You think I'm exaggerating? Just look how DCMA handled its soon-to-be-infamous-when-the-Boards-and-Courts-get-through-with-it "Contractor Recovery Initiative".

So if DCAA determines that the submission is inadequate, it is going to be inadequate. And good luck appealing the CO's Final Decision. I'm not even sure it's appealable. The contractor would need to demonstrate some injury from a determination that its submission was inadequate ...

H2H

From my reading of the DCMA Review Board matrix, this is not a action that requires Review Board review.

(*) If there is some courageous ACO reading this, and you have (or are willing to) take a DCAA determination that a contractor's final indirect rate proposal is inadequate to a Review Board, then please post here so that I can publicly laud you. You are truly exceptional.

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Joel - Thanks for the laugh.

All - If you have not been to dcaa.mil lately, there is a new version of the ICE Adequacy checklist dated Nov. 2011,

now 7 vs. 3 pages, but same stuff. I have also never had DCMA disagree with DCAA's decision on ICE or anything.

I agree best bet is submitting ICE file with schedules in order, but I add several things to the ICE models that I do.

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Joel - Thanks for the laugh.

All - If you have not been to dcaa.mil lately, there is a new version of the ICE Adequacy checklist dated Nov. 2011,

now 7 vs. 3 pages, but same stuff. I have also never had DCMA disagree with DCAA's decision on ICE or anything.

I agree best bet is submitting ICE file with schedules in order, but I add several things to the ICE models that I do.

It is interesting to note that the checklist seems to indicate that it is the auditor who determines the adequacy of an ICS and is the official with the authority to return the ICS to the contractor.

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Guest Vern Edwards

This has been a very interesting thread. However, the participants have used a lot of unexplained acronyms and abbreviations. I understand why, but it limits the thread's usefulness for those who would like to learn.

Anyone who wants to try to understand the issues that have been discussed should download DCAAP 7641.90, "Information for Contractors" (January 2005), which can be found by going to the DCAA homepage, http://www.dcaa.mil, and looking in the lefthand column at the bottom of the page. Once you have it, read Chapter 6, "Incurred Cost Proposals."

Depending on how much you want to know, you might also read Cost Accounting Standard 410 (48 CFR 9904.410), "Allocation of business unit general and administrative expenses to final cost objectives," which explains terms like "value added G&A base" (value-added cost input base) which was used in the very first post. See 48 CFR 9904.410-50(d)(2). See also Cost Accounting Standard 418 (48 CFR 9904.418), "Allocation of Direct and Indirect Cost." If you have the time, it will be worth the effort.

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