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does anyone know if there is a "wrong way" to bill the govt for COLA expenses. - For augument purposes, assume that the contract allows this expense to be billed. Anway here are two ways

1. Bill it as an ODC

or

2. account for it in the rate build up - embedded in the T&M bill rate.

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does anyone know if there is a "wrong way" to bill the govt for COLA expenses. - For augument purposes, assume that the contract allows this expense to be billed. Anway here are two ways

1. Bill it as an ODC

or

2. account for it in the rate build up - embedded in the T&M bill rate.

Has the Cost of Living really increase?

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Guest carl r culham

Your question does not provide enough information. Question suggests you have a cost reimbursement contract or a T&M or? More importantly what does the contract say about the COLA, just that it is allowed? Seems that it should say how the adjustment is made. It could be guessed that you are asking the question because the contract is silent but experience in seeing threads in this forum suggests that there are always surprises. Bottom line some additional details would probably help in getting your question answered or a least some helpful ideas on approach.

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First, let's make sure we're talking about the same thing. COLA is an adjustment to an employee's salary or hourly wage rate based on moving from one duty station to another, where the new duty station has a higher cost of living than the old one. It is not escalation on materials or subcontractor costs, and it is not a DOL wage determination increase.

Next, I'm going to go ahead and non-concur with Carl's advice. In my view, the most important issue to pin-down is what does the contractor's Disclosure Statement and/or policies and procedures have to say about how it treats COLA costs? To that I would also add: how were the costs proposed? And: what has the contractor's past practice been on its other contracts? Contract type is less important to my analysis, because I believe that the proper billing treatment will follow the proper cost accounting treatment.

I guarantee that COLA costs are treated differently by different contractors. Sometimes you'll find such costs in labor, because they are generally upward adjustments to direct labor costs. You might also see them in fringe benefit costs, to distinguish them from "normal" salary costs. Frequently they are found in ODC because that's the contractor's practice. There is nothing inherently wrong with any of these practices, so long as they are followed consistently by the contractor.

Hope this helps.

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Guest carl r culham

here_to_help - So are you saying that if the contract is a T&M with fixed rate for the time element that the contractor would do a disclosure statement, have to adhere to their policies and procedures on COLA, hold to their handling of the cost in their initial proposal and hold to what has been done on past contracts? It is quite possible, again depending on contract type, that none of these apply (heck we do not know if we are talking about an action that is under SAT, done as a SAP and/or as commerical item) so I stick to my post that contract type and the contract itself are of primary importance. If the contract type is cost reimbursement and is otherwise silent to the COLA then I might agree with your statements.

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here_to_help - So are you saying that if the contract is a T&M with fixed rate for the time element that the contractor would do a disclosure statement, have to adhere to their policies and procedures on COLA, hold to their handling of the cost in their initial proposal and hold to what has been done on past contracts? It is quite possible, again depending on contract type, that none of these apply (heck we do not know if we are talking about an action that is under SAT, done as a SAP and/or as commerical item) so I stick to my post that contract type and the contract itself are of primary importance. If the contract type is cost reimbursement and is otherwise silent to the COLA then I might agree with your statements.

I think here_2_help has jumped prematurely to a conclusion as to what COLA means. Without knowing what it means in the context of this deal, saying definitively that it "is an adjustment to an employee's salary or hourly wage rate based on moving from one duty station to another," may or may not be accurate, but definitely is not readily apparent from the facts presented.

The implication in learningtheropes's initial post is that the contract is T&M (see reference to "the T&M bill rate"). I agree with Carl that one needs to read the contract to determine what it says the government will pay.

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Hi Navy,

I may have jumped to a conclusion as to what COLA means, but only in an effort to help out. Telling the poster to be more clear is certainly appropriate, but then there is no learning to be had by others. Anyway that's what was on my mind when I posted as I did.

Carl, we have to assume the contact is silent regarding how to handle COLA increases (whatever they may be), else why ask the question. My post assumed (perhaps incorrectly) that we had to address an ambiguous situation, and was suggesting what would be helpful, in my view.

I am NOT saying what you suggested I was saying. What I was saying is this:

In the absence of clear agreement in the contract as to the treatment of any particular element of cost for billing purposes, a contracting officer likely will be looking to have some assurance that the cost being billed is allowable, reasonable, and allocable to the contract. There are several ways to accomplish that task. Among those are:

S/he might want to look at the original proposal to see how the contractor intended that cost element to be treated. A contracting officer might wish to have the contractor produce its Disclosure Statement to document its disclosure to the Goverment (prior to award) how the cost element would be treated. If the contractor doesn't have a Disclosure Statement, one might look at existing policies and procedures to see if the current treatment is a deviation from policy. One might look at how the contractor has treated the cost element in its other contracts, to ensure consistency.

See FAR 31.201-3.

31.201-3 Determining reasonableness.

(B) What is reasonable depends upon a variety of considerations and circumstances, including?

(1) Whether it is the type of cost generally recognized as ordinary and necessary for the conduct of the contractor?s business or the contract performance;

(2) Generally accepted sound business practices, arm?s-length bargaining, and Federal and State laws and regulations;

(3) The contractor?s responsibilities to the Government, other customers, the owners of the business, employees, and the public at large; and

(4) Any significant deviations from the contractor?s established practices.

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Guest carl r culham

here_to-help - Call me unconvinced regarding your specifics until the details are known. I have never disagreed in general but providing the detail you have could be leading one in the wrong direction. The original question was how do I bill when COLA is "allowed" is a loaded question. The question is not simply 1. or 2. until details are known. In my view you have jumped to justifying a "cost" to be paid when it could in fact be a "price" that needs to be paid.

Example - Lets say that it is a T&M and that both FAR 52.232-7 and FAR 52.216-4 are included in the contract. To determine the billing manner I say that learningtheropes has a little more effort in front of him/her than just trying to determine whether to include in ODC or account for it in rate build-up. Was a new "price" negotiated? If yes then just bill the price, if no then fulfill the obligation under 52.216-4 first.

Heck we do not even know whether learing is from the contractor or Government side which I believe would also effect how to respond. Both of us have assumed Government but we just don't know.

Enough said from my chair. I will wait for learning to provide more details and then go from there.

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does anyone know if there is a "wrong way" to bill the govt for COLA expenses. - For augument purposes, assume that the contract allows this expense to be billed. Anway here are two ways

1. Bill it as an ODC

or

2. account for it in the rate build up - embedded in the T&M bill rate.

learningtheropes:

A cost of living adjustment is a labor cost. Ordinarily, one would expect a labor cost to be included in the T&M labor rate. In order to add it to the rate, the parties would have to modify the contract. However, there is no standard procedure for "billing" COLA expense, and we cannot see your contract, so we have no way of knowing how to answer your question. What does your contract say?

Now I have a question for you: Why didn't you write complete English sentences with standard punctuation and proper spelling? I can tell you that there are people who have read your post who do not think well of you because of the way you wrote it. They wonder if you are illiterate or merely careless or lazy. You will receive more respect and better responses to your questions if you would write acceptable English. It would show that you respect us well enough to make the effort to write to the standard of an educated person, which is what a contracting professional is supposed to be. Compare your post to the posts of the people who responded to it.

I'm not trying to insult you. I'm doing you a favor.

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Good Morning - our shop manages several contracts with folks stationed overseas who are entitled to COLA. For the T&M contracts, the KO negotiated an "overseas" labor rate since most of these are Schedule orders and the vendors' schedule specifically stated rates were for work in CONUS.

For the Cost Plus type contracts, we tend to negotiate COLA/HOLA into the ODC bucket. Although it's a labor cost, we negotiate it to ODCs so the vendors cannot burden it with fringe, OH, etc - generally only G&A. Since the fringe burden tends to be in the 25% range and overhead can easily be 40% or more, this results in a decent cost savings that our KOs can achieve for our clients. The practice is not part of any written policy - just a shared practice among most of the KOs.

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does anyone know if there is a "wrong way" to bill the govt for COLA expenses. - For augument purposes, assume that the contract allows this expense to be billed. Anway here are two ways

1. Bill it as an ODC

or

2. account for it in the rate build up - embedded in the T&M bill rate.

Let me try this again.

Yes, learningtheropes there are several "wrong ways" to bill the govt for COLA expenses. Here are a few of them, focused on the contractor's point of view:

1. Propose the costs one way and bill them in a different way. This is especially good in a competition where price is a significant evaluation factor, when it can be shown that your original proposed treatment resulted in a lower proposed price, but your actual billing treatment results in higher prices. If you are a CAS-covered contractor, you get bonus points for the CAS 401 noncompliance.

2. Account for costs as direct labor, and bill them as ODC. This is a great method if you are close to losing money on your hourly T&M billing rates and can shift the otherwise margin-eroding COLA costs to the Material part of the T&M billing. Highly recommended, especially if your company already has a Deferred Prosecution agreement with the DOJ and is itching to spend money on external attorneys.

3. Account for the costs as labor overhead, and bill them as ODC. This is a variant on #2, above. Has the added feature of potential allocability issues (see, e.g., CAS 418).

4. Account for the costs as ODC, and bill them as labor. This one is tricky and counter-intuitive. Assume that as an ODC, indirect burdens are minimal (maybe only G&A, perhaps a material handling burden). But as labor the costs will be absorbing fringe and labor overhead, drawing some costs away from your other fixed-price work, thus resulting in higher margins for other contracts. If the contract mix is right, you can make a lot of money using this method. Make sure to factor litigation defense costs into the business case.

5. Account for the costs as an unburdened uplift, and add indirect cost burden(s) to your billed amounts. This method involves adding a burden to the contract billings that you don't actually incur. Given the DCAA's current propensity for voucher reviews, should be considered high-risk. But hey, what the heck. No risk, no reward, right?

6. Have a CASB Disclosure Statement that tells the Government how you will be treating the costs, then treat then differently. CAS noncompliances are always good for a laugh.

7. Treat the costs one way for all your contacts but this one, which will be treated differently. Your trick will be to try to explain to the various investigators why the facts and circumstances of this particular contract merited the "special treatment." (Remember that phrase.) Again, bonus points if you are a CAS-covered contractor.

8. Have a policy that clearly tells people how the costs will be treated, but treat them differently for this contract. This of course is an internal control issue. Remember, April Stephenson testified that 69& of all LOGCAP contractors' business systems were inadequate! (Or did she say that 69% of all DCAA audit reports on LOGCAP contractors' systems were inadequate? I forget.) Anyway, that will be a good excuse for your attorneys to use in court.

9. Have the treatment expressly covered by a contract clause, but ignore it. According to the latest SIGIR report, nobody is looking hard at contractors' invoices anyway. You could get away with this one for maybe a year or two before anybody noticed. Then quickly process a credit voucher and enjoy the interest you earned on your overpayment.

10. Have a MOU or Advance Agreement with your CO regarding how the costs will be billed, but don't follow it. Your CO will likely rotate off the contract in six months anyway, to be replaced by somebody who doesn't know about the agreement. Eventually somebody will notice, but you might be retired by then.

I'm sure there are plenty of other ways to bill COLA costs incorrectly. These are just the ones I came up with on the fly. I tried to provide relative comparisons to help you decide which one to use. I hope this helps.

May I suggest, as Vern and others have, that you come back to this thread with some more details, more coherently articulated?

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Let me try this again.

Yes, learningtheropes there are several "wrong ways" to bill the govt for COLA expenses. Here are a few of them, focused on the contractor's point of view:

.........

I'm sure there are plenty of other ways to bill COLA costs incorrectly. These are just the ones I came up with on the fly. I tried to provide relative comparisons to help you decide which one to use. I hope this helps.

Thanks here_2_help for my daily laugh. I nearly fell out of my chair reading this. :lol:

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Good Morning - our shop manages several contracts with folks stationed overseas who are entitled to COLA. For the T&M contracts, the KO negotiated an "overseas" labor rate since most of these are Schedule orders and the vendors' schedule specifically stated rates were for work in CONUS.

For the Cost Plus type contracts, we tend to negotiate COLA/HOLA into the ODC bucket. Although it's a labor cost, we negotiate it to ODCs so the vendors cannot burden it with fringe, OH, etc - generally only G&A. Since the fringe burden tends to be in the 25% range and overhead can easily be 40% or more, this results in a decent cost savings that our KOs can achieve for our clients. The practice is not part of any written policy - just a shared practice among most of the KOs.

So, woops85, what you do is negotiate a deal in which you avoid paying the labor overhead properly allocable to the direct labor costs known as "cost of living adjustment," except for G&A, by agreeing to misclassify those direct labor costs as "other direct costs." You do that rather than simply agreeing in advance that the allocable labor overhead will be expressly unallowable.

Is that right?

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So, woops85, what you do is negotiate a deal in which you avoid paying the labor overhead properly allocable to the direct labor costs known as "cost of living adjustment," except for G&A, by agreeing to misclassify those direct labor costs as "other direct costs." You do that rather than simply agreeing in advance that the allocable labor overhead will be expressly unallowable.

Is that right?

Since I'm not sitting in during the negotiations, I can't say if the way you phrased it is right or wrong. Perhaps the agreement was reached and the vendor shows it on their invoices as ODCs because their accounting systems can't handle billing it as labor without adding all the same burdens. But I'll ask them

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