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Cost realism analysis on rates including uncompensated overtime hours

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Hi Everyone,

In a simplified and hypothetical situation, an exempt employee with an annual salary of $72,800 is making $35 an hour ($72,800/2080 hour =$35). If the same employees worked 104 hours of uncompensated overtime last fiscal year, the effective hourly rate becomes $33 an hour ($72,800/2,184 hour=$33) under a total time or full-time accounting system. The vendor is DCAA audited, has an approved accounting system and an audited CASB disclosure statement.

Assuming the rate of $33 is now a FPRA rate:

Question 1 – Most evaluators would solely base their fair and reasonable determination on the rate being a FPRA (or FPRR) rate; does this create an unfair competitive advantage? Should the rate be considered fair and reasonable in this instance or should the evaluator further research other sources? 

Question 2 – FAR 52.237-10 Identification of Uncompensated Overtime paragraph (b)(2) states that labor hours subject to the adjusted hourly rate shall be identified. If the Government is seeking 1,000 hours of services, aren’t the entire 1,000 hours subject to the adjusted rate since the FPRA rate has taken into account of uncompensated overtime? In this case, should the evaluator adjust the rate upward to $35 an hour or adjust the hours upward proportionally? GAO case B-411771,B-411771.2: Oct 20, 2015 is the only precedence that was found but it does not touch upon the realism of rates.

Your thoughts and inputs are appreciated.

Thank you.

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Intentionally not commenting on Question1, just Question 2.

I'm looking at this from the contractor's side. To me, there is no longer any uncompensated overtime because the hourly rates have been adjusted downward in the FPRA to account for the uncompensated overtime. Thus, there is no longer a competitive advantage accruing to the contractor that proposes uncompensated overtime. I wouldn't expect any further adjustments.

Hope this helps.

 

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Hi here_2_help,

Thank you for the reply. I can guess why you didn't respond to question 1 on purpose.. :)

Your explanation makes sense. Since the hourly rate has been adjusted to reflect the total hours worked, technically, the rate does not include "uncompensated" overtime.

Cheers! 

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