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SLK Contractor

T&M Proposed Labor Rate buildup question

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T&M rates for IDIQ as submitted to prime (govt customer DHS) were computed as follows:

(example)

Direct Labor Overhead G&A Loaded Cost Profit % Profit T&M Labor Cat Per Hour 50% 10% Per Hour (varies) Amount Rate Programmer $ 50.00 $ 25.00 $ 7.50 $ 82.50 11% $ 9.08 $ 91.58 Analyst $ 40.00 $ 20.00 $ 6.00 $ 66.00 6% $ 3.96 $ 69.96 Engineer $ 30.00 $ 15.00 $ 4.50 $ 49.50 8% $ 3.96 $ 53.46

Question:

Is the profit % varying by Labor Category going to pass audit? The pricer is saying risk of hiring suitable personnel at the bid DL (which was based on BLS) varies per LC so profit % should vary based on this risk. I've only seen one profit % applied to all LCs in a given proposal before.

Opinions?

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Ugh, that didn't work - the data was in a table but format didn't save. In a nutshell they are applying 11% profit to the Programmer, 6% to the Analyst, and 8% to the Engineer. Does this work, or does the profit % have to be the same for all 3?

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Why are you worrying about the varying profit rates instead of whether the rates are reasonable? As for an audit, DCAA does not audit profit because it is not a cost and is a matter of business judgment for the contracting officer.

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As a follow-on to retreadfed's comment, what's important is whether the labor rate is reasonable and affordable. It is permissible for a contractor to propose 11% profit within the Programmer hourly rate, 6% within the Analyst hourly rate, and 8% within the Engineer hourly rate. It is also permissible for the Govenrment to try to negotiate lower hourly rates (not lower profit, per se, but lower hourly rates). The parties to the negotiation may reserve their own interpretations regarding the effect of the negotiations on individual elements of the hourly rate.

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This also isn't a whole lot different than negotiating varying profit/fee percentages with contract types. A contract may contain multiple CLIN with varying contract types. Based on associated risks by CLIN, you would expect different profit rates.

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