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Invoicing CP

Subcontract - CPIF task order. Standard process used to build cost plus rate (1 salaried individual, 1 hourly individual on contract) cost base calculated for both types of individuals. (salary, calculated to hourly rate based on 2080 hours for the year) or (hourly rate accordingly), OH&G&A applied (accordingly)= resultant rate,

This build up was provided at bid in sanitized version to prime and un-sanitized version to govt. (approved and awarded)

Client invoiced for number of hours X Resultant rate.. in a standard month, (160 hours), Salaried individual works 120 hours, hourly works 160 hours. Client returns to question why the salaried individuals rate did not fluctuate based on the number of hours worked…. (this is where I need help)

I understand the concept of Uncompensated over time causing the cost base to fluctuate if a salaried person works more hours than a standard week / month. However, we do not have uncompensated over time, so I have no trouble making this calculation / adjustment.(this is not the issue)

But what happens when a salaried individual works “less” than a full month? Client requesting to see rate fluctuation, but based on cost build up, if I fluctuate the “cost” (which by this situation would go up, not down) would that not be double dipping, if I’m building my cost with “salaried down time” calculated into my OH already? Why would my cost change, if I’m only invoicing for the number of hours worked at the resultant rate?

Invoicing requirements stated in the contract:

Subcontract number & TTO number

Total Straight Time labor charges by person – hours, labor category , rate per hour, and extended amounts or Fixed unit price and quantity delivered

Material costs (if any)

Travel and per-diem costs (if any) itemized by TTO

Other costs incurred (if any) allowable under this subcontract

Total current invoice amount and

Cumulative billings by TTO to date

This is exactly what was provided on the invoice

Isn't this why we build a negotiated rate schedule - submit and get approved, and the true up at year end with an ICE review /submit?

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C_R --

It's not clear to me whether the salaried employee is assigned on a full-time basis to the Task Order or charges what s/he works. If s/he charges what s/he works then the salary remains the same but the Task Order gets charged 120/173 (or 120/160 if you will) of the monthly salary expense.

Hope this helps.

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C_R --

I still don't understand what you mean. Some contracts require named personnel to be assigned full-time (except for paid leave) and therefore the contract pays 100% of all salary costs regardless of how many hours are worked. But the normal approach is that employees charge hours to contracts based on work performed. In the latter case, if there is no worked performed then the individual does not charge the contract.

Which is it?

Thanks

H2H

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Rookie, did the salaried employee work 120 hours on the TO and 40 hours on another project? If so, was the other project charged to an indirect account or a direct charge to another contract? Or did the employee work only 120 hours total for the month?

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and here I thought I was providing such good detail and explanation... The salaried employee is assigned 100% full time to this one task. No other work was performed on any other task, and this salaried employee will work no other task but this one until it's completion.

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C_R,

You specified that the (sub)contract is a CPIF type. That means you bill your customer for ACTUAL COSTS INCURRED regardless of the rate that was bid. Now, "actual costs incurred" is a three word phrase but it's very tricky in practice. So let me break it down for you --

1. Actual direct labor dollars as recorded on the contract. Since you specified the employee is required to be full-time on the contract that means 100% of the salary costs paid to that employee, less paid leave time and less any indirect charges (e.g. training).

2. Actual direct material dollars as recorded on the contract. Direct material dollars are recorded as per your company's practices, which can vary by contractor.

3. Other Direct Costs such as travel as recorded on the contract.

4. Indirect rates as per contract terms or as per approved provisional billing rates (see 52.216-7). Indirect rates are applied as your company's practices, which can vary by contractor.

5. Any base fee permitted to be billed as per the contract terms.

And that's what you bill. Nothing more, nothing less (unless you've exceeded available funding, in which case, oops!)

In this scenario, your customer is billed less labor dollars because your employee spent fewer hours on the contract. (120 hours versus 173.3)

You seem to be confusing cost-type billings (Form 1034) versus T&M billings. They are not the same. DCAA has a publication "Information for Contractors" that you should read.

Hope this helps.

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Nothing like a little "light" reading to start the day with... Thank you, I do understand, but if I determine that Salary/2080+OH+G&A = Loaded Cost, this cost would remain the same regardless of hours worked.. 2 or 5000. (understanding that we do not have uncompensated over time) my cost would not fluctuate as this is my "actual" cost for the individual, for every hour they work. correct?

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H2H: You said "You seem to be confusing cost-type billings (Form 1034) versus T&M billings. They are not the same. DCAA has a publication "Information for Contractors" that you should read."

Is it CR that is confusing things or the client? The original post made it sound like (1) the employee worked 120 hours on the contract, (2) the employee was billed for 120 hours, (3) the billing rate was actual cost (hourly rate + OH + G&A), but (4) the client thinks there should have been an unspecified lower rate. So, the question for me, since it it sounds like it was billed properly, is why the client thinks there should be a different (presumably lower) rate.

CR, have I described it properly? If so, does the client tell you what hourly rate it expects, or why it thinks the hourly rate for a full month should be different than the hourly rate for a partial month?

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The client thinks that the rate should have fluctuated based on hours worked. i.e. less than a full month cost would go up, more than a full month and cost would go down. I was looking for feedback to make sure I hadn't seriously misunderstood how to build loaded cost and invoice it..

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Guest Vern Edwards

The customer is probably thinking along the lines of cost-volume-profit analysis, in which it assumes that some of the employee cost is variable and some is fixed. Thus, when the employee works fewer hours than expected in the performance period, the fixed cost for that period is allocated to a smaller base, resulting in a higher rate. When the employee works more hours than expected, the fixed cost is allocated to a larger base, resulting in a lower rate.

If that is what the customer is thinking, who knows why? None of us can see your contract, so we cannot determine if there is something in it that prompts the customer to think that way. Your customer's thinking is a mystery to us, but it might be sound.

Ask the customer for an explanation.

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It appears that the first month of the TO started in the middle of the month (partial month). Even though the individual is assigned full time to the TO you need to prorate the first month charge to the customer to reflect actual hours worked on the TO even though the individual is paid by your company for the full month or is working full time. The time before the TO started should not be charged to the customer directly or indirectly. The first partial month charge will be less than the second full month charge. They should not be the same by adjusting the labor rate.

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Thanks all,

The client was only invoiced for the hours worked.. not the full month.. i.e it was prorated..

6 phone calls, multiple e-mails and a week of digging through FAR clauses, contract clauses and verifying my own process for cost buildup, it was discovered that the client accounting department was calling my invoice a T&M invoice because it had an hourly rate on it (said rate was my loaded cost number).. Solution.... remove the hourly rate and reflect the number of hours at the total cost for the period. Accounting is happy and invoices are being paid.. Is it really that common for Accounting and Contracts to not be on the same page?

There are many other posts out here providing useful, thank you for sharing your knowledge with a rookie!

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And wvanpup wins the internet for the day

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