FFP CONTRACT WITH TRAVEL AND ODC AS COST

[firstteam7479]

Just need a sanity check here by some of you 'grey beards' that have been around for a day or two. I've received a draft FFP subcontract from my Prime for labor -- hours and dollars -- with a seperate cost reimbursement no fee SLIN for ODC and Travel. We are a small business and the issue is that since our cost accounting system has not yet been audited by DCAA for a determination of adequacy -- the Prime wants to levy terms and conditions allowing reimbursement of direct costs only for ODC and Travel but excluding indirect. Recent discussion with DCAA demonstrated that if we incurred the indirect cost (on travel and ODC) but would not bill it -- then we would have to explain to audit why that was so (and a rationale of Prime contract terms and conditions were not sufficient justification) OR move those costs to unallowable. That is not acceptable. While I understand the Prime's intent to comply with FAR 16.301-3, Limitations, as a metric to issuing a cost SLIN -- it does not make sense when we are billing our USG customer indirect on our travel and ODC on our T&M contracts. The Prime -- through their purported language -- is penalizing a SB not because it does not have an adequate system but it is penalizing that SB for not yet being audited by the DCAA. And this request for audit is beyond the control of the SB. Furthermore -- if the prime is that concerned -- they should then request DCMA for field audit support (again contract is FFP and under $10M) to audit our internal procedures and indirect rates. And just for the record -- we have submitted Incurred Cost Proposals for the past 4 years and we have a predominance of T&M, a few FFP -- but obvioulsy no CPFF to this point.

What am I missing here? With that applied logic of 'stripping' out the indirect from ODCs on T&M or cost SLINs for FFP vehicles -- it severely impacts the revenue for a small company.

[Retreadfed]

Just need a sanity check here by some of you 'grey beards' that have been around for a day or two. I've received a draft FFP subcontract from my Prime for labor -- hours and dollars -- with a seperate cost reimbursement no fee SLIN for ODC and Travel. We are a small business and the issue is that since our cost accounting system has not yet been audited by DCAA for a determination of adequacy -- the Prime wants to levy terms and conditions allowing reimbursement of direct costs only for ODC and Travel but excluding indirect. Recent discussion with DCAA demonstrated that if we incurred the indirect cost (on travel and ODC) but would not bill it -- then we would have to explain to audit why that was so (and a rationale of Prime contract terms and conditions were not sufficient justification) OR move those costs to unallowable. That is not acceptable. While I understand the Prime's intent to comply with FAR 16.301-3, Limitations, as a metric to issuing a cost SLIN -- it does not make sense when we are billing our USG customer indirect on our travel and ODC on our T&M contracts. The Prime -- through their purported language -- is penalizing a SB not because it does not have an adequate system but it is penalizing that SB for not yet being audited by the DCAA. And this request for audit is beyond the control of the SB. Furthermore -- if the prime is that concerned -- they should then request DCMA for field audit support (again contract is FFP and under $10M) to audit our internal procedures and indirect rates. And just for the record -- we have submitted Incurred Cost Proposals for the past 4 years and we have a predominance of T&M, a few FFP -- but obvioulsy no CPFF to this point.

What am I missing here? With that applied logic of 'stripping' out the indirect from ODCs on T&M or cost SLINs for FFP vehicles -- it severely impacts the revenue for a small company.

I am confused by your question. Are you saying that the prime does not want to permit you to burden travel and ODCs with indirect costs? Also, I don't understand your statement " we incurred the indirect cost (on travel and ODC)." Indirect costs are not incurred on direct costs. Indirect costs are incurred and then allocated to contracts based on the amount of base costs allocated to those contracts. As far as what you were told by DCAA, DCAA is wrong as nothing requires a contractor to bill the government for all costs allocated to a contract. What is required is that all properly allocable costs are allocated to a contract.

[Guest Vern Edwards]

firstteam7479"

The only question I see in your post is: "What am I missing here?" I don't think you're missing anything. You seem to understand the situation perfectly.

Indirect costs are difficult and expensive for buyers to verify before reimbursement. The prime apparently doesn't want to take the risk that if it reimburses you it will not get reimbursed by the government for what it paid you.

Your only recourse is to negotiate a better deal with the prime than it is offering you -- perhaps some kind of interim payment pending audit. There are many possibilities, including walking away from a bad deal.

File this under Life in the Big City.

[firstteam7479]

firstteam7479"

The only question I see in your post is: "What am I missing here?" I don't think you're missing anything. You seem to understand the situation perfectly.

Indirect costs are difficult and expensive for buyers to verify before reimbursement. The prime apparently doesn't want to take the risk that if it reimburses you it will not get reimbursed by the government for what it paid you.

Your only recourse is to negotiate a better deal with the prime than it is offering you -- perhaps some kind of interim payment pending audit. There are many possibilities, including walking away from a bad deal.

File this under Life in the Big City.

Hello Vern and thank you for the response and confirming the thought process here. Yes, I agree -- the key to this is negotiating with the prime and aim to work out a reasonable deal. Thank you for your time in looking at this.