Executive Compensation Blended Rates

[joan]

Greetings all:

 

Would like to use the lower of the rates to forecast in the FPRP.  For purposes of incurred costs I'd like to calculate and use  blended rates.

 

Do I have a CAS issue - 401? 

[here_2_help]

No, because you can use estimating techniques which are not necessarily cost accounting practices. See CAS 401 Interpretation No. 1.

That being said, you seem to have reversed the "acceptable" approach used by industry. Normally contractors use the blend to forecast costs, because DoD Pricing and DCMA have issued guidance that found that approach to be acceptable for contract (and indirect rate) estimating and pricing purposes. You want to use the blend to calculate your actual incurred costs. I'm not sure that's going to fly.

You didn't ask, but I'll volunteer that another problem with your proposed approach is that DCAA has expressly rejected the blend approach for incurred costs, asserting that it violates statutory requirements and results in expressly unallowable costs. Thus, your approach is likely to result in an adverse audit report. If you have auditor-determined indirect rates, then you are in trouble. If you have contracting officer negotiated rates, you may be able to overcome the initial findings. Regardless it's still a risk.

Hope this helps.