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jsimancas

Request to Increase Ceilings of Indirect Rates

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Has anyone had success in requesting to increase ceilings of indirect rates on a CPFF contract? We are a small business that entered into a CPFF with ceiling indirect rates 4 years ago. Our actual ceiling rates are now significantly higher. We have approached our Contracting Officer who asked that we develop sound arguments they could use in a determination and finding memo.

Any help, guidance or reference to successful case law would be great.

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jsimancas,

First, I'm not sure we are speaking the same language. You write that "our actual ceiling rates are now significantly higher," which simply does not make sense. Ceilings are ceilings; fixed and locked into the contract terms. Actual rates are actual rates; calculated based on actual indirect costs allocated over actual base amounts. Can you clarify what you mean?

Assuming you have fixed indirect rate ceilings in your CPFF contract, do you have a good understanding of why the indirect ceilings were agreed-upon and how they were calculated? I would start there.

If you mean "provisional billing rates" instead of "ceilings of indirect rates" then you need to start with the requirements of the Allowable Cost and Payment Clause (52.216-7) which is in your contract. The clause tells you how and when and why to request increases to your billing rates when your estimated final billing rates are higher than provisional billing rates.

And if I may offer a bit of advice, if you don't really understand the lifecycle of indirect rates and you have a CPFF contract, then you really need some expert assistance to help you navigate the situation you are in. It's understandable that a small business with its first CPFF contract would have trouble with the nuances, but you need to fill your knowledge gap with outside assistance.

Hope this helps.

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Thanks! To clarify I meant "Our actual indirect rates are now significantly higher." We agreed to ceiling rates based on our provisional rates. The ceiling rates in our contract is what we would like increased.

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jsimancas,

So, to be clear: you and the government agreed to provisional billing rates. Separately, you and the government agreed that the actual (final) rates you billed on your CPFF contract would never exceed the provisional billing rates. Two agreements, right?

If you agreed that your provisional biling rates would be locked into the contract as a ceiling, what makes you think you can get them increased after the fact? What consideration are you offering?

On the other hand, perhaps we are still speaking different languages. Sometimes a contract specifies the provisional billing rate to be used but that rate is NOT A CEILING and can be mutually revised to prevent significant over- or under-billings, based on the current estimated final rates. Perhaps that's the situation you are describing? If that's the case, it's a relatively straightforward case. Show the CO your estimated final rates and the drivers that led to rate increases. Most COs understand that rates go up and down as business conditions change, especially at a small business where the law of large numbers doesn't operate very well.

And please consider hiring a consultant to help you out.

H2H

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