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My company submitted a proposal for an effort which included facilities capital cost of money. The resulting contract contains neither 52.215-17 or 52.215-16. We meet all of the criteria under 31.205-10(b and our COM calculations are compliant to the limitations in 31.205-52. However, our customer is now telling us that COM is not an allowable cost. Under what circumstances would this be the case? I'm assuming that the omission of 52.215-16 is of no bearing as it is a required clause for cost reimbursable supply contracts when applicable.

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The provision at FAR 52.215-16 is not intended to go into contracts -- it only goes into solicitations.

Did the solicitation on which your contract was based include the provision at FAR 52.215-16?

In your offer (not your technical proposal or price back-ups), was Facilities Capital Cost of Money clearly identified as a cost? If so, the resulting contract properly does not contain the provision at FAR 52.215-16 or the clause at FAR 52.215-17. Are you willing to assert in writing your right to reimbursement in a sum certain?

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In your offer (not your technical proposal or price back-ups), was Facilities Capital Cost of Money clearly identified as a cost?

If by "price back-ups" you mean a cost beakdown, why wouldn't identification of FCCOM in the cost breakdown be sufficient to meet the standard for proposing FCCOM pursuant to FAR 52.215-16? If "price back-ups" means something else, what does it mean?

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It would if it Facilities Capital Cost of Money was clearly identified as a cost. If not, then maybe no. That's why I asked the question -- it's a reasonable question.

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siwilliams:

Did the CO explain why COM is unallowable? It is not enough for the CO to make that assertion. You are entitled to an explanation, so you can decide whether or not the assertion is true.

Did you ask the CO for an explanation?

What is the rule about the allowability of COM? What facts are pertinent to the determination under that rule?

What are the facts in your case?

When the rule is applied to your facts, what result do you get? Allowable or unallowable?

If you disagree after you get an explanation, do you disagree with the statement of the rule, with the statement of the facts in your case, with the application of the rule to the facts, or with some combination of those?

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In your offer (not your technical proposal or price back-ups), was Facilities Capital Cost of Money clearly identified as a cost?

ji:

What distinction are you making between the "technical proposal" or "price back-ups" and the offer? Are they not part of the offer? How do you know? Doesn't it depend on certain facts? Do you know those facts?

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Vern,

Like you, I know only as much as the original poster has told us. I'm trying to be helpful to the original poster.

The original poster doesn't understand why the contracting officer is not allowing the cost in his or her contract, and asked, "Under what circumstances would this be the case?" In an attempt to be helpful, I wondered if the original poster clearly identified FCCOM as a cost in its offer before the contract was awarded -- if the original poster merely "included" (its words) but did not clearly identify FCCOM as a cost in its offer, then that might be a reason why the contracting officer is not allowing the cost.

FAR 31.205-10( b )( 3 ) says cost of money is allowable if "[t]he estimated facilities capital cost of money is specifically identified and proposed in cost proposals relating to the contract under which the cost is to be claimed." Failure to comply with FAR 31.205-10( b )( 3 ) is a circumstance which would make FCCOM an unallowable cost. Do I know that this is the case here? No. But this is a circumstance where FCCOM would be not be allowable, and that was the original poster's question.

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ji: Thanks. I wasn't criticizing your question, I was only wondering about your remark: "your offer (not your technical proposal or price backups)." The reason I wondered was because the typical RFP does not clearly identify what part of an offeror's proposal is the offer and what part is just information, an issue that Ralph Nash and I have discussed many times in The Nash & Cibinic Report. We have advocated clearer identification of what part of a proposal is the offer (promises) and what part is merely information that is not promissory in nature.

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If the original poster is hoping for an answer to the question(s) posed, I hope s/he returns to provide the requested clarifications.

If siwilliams doesn't post a response in the next 24 hours, I move the thread be closed. No sense speculating without facts.

H2H

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REA'n Maker,

That's not the rule for determining whether FCCOM is an allowable cost, or not.

H2H

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My point is that the issue may actually be that FCCOM is not allocable to that contract rather than not allowable per se.

" In other words, the contractor accounts at the total company level for facilities cost. This total, which is divided into various overhead pools as determined by the contractor, is then allocated to an individual contract based upon that contract’s use of direct charges that those overhead pools would be applied to"  https://dap.dau.mil/aap/pages/qdetails.aspx?cgiSubjectAreaID=3&cgiQuestionID=108904

Further:  "The business-unit's facilities capital cost of money is then broken down by overhead pool and allocated to specific contracts using the same allocation base used to allocate the indirect costs in the overhead pool.... The estimated facilities capital cost of money is specifically identified or proposed in cost proposals relating to the contract under which the cost is to be claimed. " http://www.acq.osd.mil/dpap/cpf/docs/contract_pricing_finance_guide/vol3_ch10.pdf

 For example,  job-related training is allowable, but not allocable to every contract (compared to alcohol and/or the CEO's summer lake house, which are never allowable OR allocable).

In short, Allowability requires Allocability:  http://www.dcaa.mil/FAR_Cost_Principles_Guide.pdf

 

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REA'n Maker,

Your post about use of capital assets on an individual contract being dispositive regarding the allowability of FCCOM with respect to that contract is just wrong.

Before I get into why it is wrong, I want to offer a word of advice. I know you are fairly new to this site -- and Welcome! -- but "Ask a Professor" answers are not normally considered to be adequate support for assertions around here. Further, your statements about allocability are somewhat questionable. Your cites/quotes are accurate, insofar as they go, but they don't really offer the support for your assertion that you may think they do.

Here's how FCCOM works:

FCCOM is either calculated by the contractor, or not. If the contractor chooses to calculate FCCOM then the calculation methodology must comply with 31.205-10 and CAS 414/417 in order to be an allowable cost. If the contractor does all that, then allowable FCCOM is distributed to the appropriate cost pools and allocated to contracts using the same allocation base as the cost pool (which is what your Contract Pricing Finance Guide is saying). For example, if FCCOM is distributed to Engineering Overhead, and Engineering Overhead is allocated on a direct labor dollar base, then as Engineering direct labor is charged to a contract, overhead and FCCOM follows that direct labor. That's how FCCOM is both allowable and allocable. It has nothing to do with whether or not a contract benefits from the deployment of a capital asset.

As others have posted, in order for FCCOM to be allowable on a specific contract -- and by that I mean billable via public voucher and reimbursable -- it must have been proposed. No proposed FCCOM, no billable FCCOM, even if both allowable in the general sense and allocable to the contract. In fact, some contractors choose not to bid (and claim) FCCOM on selected contracts for competitive reasons; they calculate it and distribute it and allocate it to all contracts, but they may claim it on less than 100% of their contracts.

Hope this helps

Edited to add: The cognizant CO doesn't get to decide; it's the contractor's choice. If the contractor proposes FCCOM and calculates it in accord with the applicable rules, it's allowable. Period. See 31.201-1.

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"Your post about use of capital assets on an individual contract being dispositive regarding the allowability of FCCOM with respect to that contract is just wrong. "

I was merely making the shorthand point illustrated by your scenario above: maybe the CO was saying that Engineering labor was not an appropriate direct charge for the effort in question.  I've seen stuff like this when a contractor proposes engineering work on a follow-on production contract (i.e., the instant contract is not reasonably expected to employ the engineering DC & O/H pool to which the allowable FCCOM is applied).

If I as CO don't accept the direct charge and its O/H pool as reasonable, allowable, and allocable to my contract, I certainly don't incorporate the associated FCCOM into my counter, regardless of CAS.   That is a possible circumstance in which  FCCOM would not be "allowed", as the OP stated.  (I suspect the OP was a bit imprecise in their terminology when stating the CO said FCCOM was "not allowable", which cannot literally be true).  

You almost make it sound as if the mere fact that the contractor proposes FCCOM makes it acceptable - that's not what you meant, is it?

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REA'n Maker,

If the allocation base is not estimated as a future contract cost, then of course the associated FCCOM is not estimated either. On the other hand, if the contractor proposes the allocation base as a future contract cost, and the CO accepts it, then the FCCOM follows along, just like overhead and/or G&A.

Now kindly stop moving the goalposts.

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If the allocation base is not estimated as a future contract cost, then of course the associated FCCOM is not estimated either. On the other hand, if the contractor proposes the allocation base as a future contract cost, and the CO accepts it, then the FCCOM follows along, just like overhead and/or G&A.

I thought that's what I said in my first post: the DC and O/H pool on which the proposed FCCOM was based were not deemed by the CO to be applicable to this effort. 

I certainly didn't mean to suggest that CO was going around checking whether specific assets are being employed on a specific contract; I was using 'capital asset' in the only context that made sense in regard to FCCOM, i.e.,  the cost pools which account for those capital assets.

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