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Hypothetical:

a company is bidding a contract which, if awarded, will triple its direct labor base. The company has forward pricing indirect rates, but those rates do not accurately represent the true indirect cost realized if the program is awarded. Can the company request DCMA to allow them to bid a ‘win-only’ adjusted set of indirect rates to use in calculating cost and price on the program? If so, what is the process? Does it vary based on contract type?

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“31.203 (e) The method of allocating indirect costs may require revision when there is a significant change in the nature of the business, the extent of subcontracting, fixed-asset improvement programs, inventories, the volume of sales and production, manufacturing processes, the contractor's products, or other relevant circumstances.”

It appears that you would be proposing “provisional” rates based upon projected budgeted labor costs, as opposed to final rates, based upon actual costs. See, for instance,  Section I of https://www.dol.gov/oasam/boc/costdeterminationguide/cdg.pdf

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2 hours ago, Mayonayze said:

Hypothetical:

a company is bidding a contract which, if awarded, will triple its direct labor base. The company has forward pricing indirect rates, but those rates do not accurately represent the true indirect cost realized if the program is awarded. Can the company request DCMA to allow them to bid a ‘win-only’ adjusted set of indirect rates to use in calculating cost and price on the program? If so, what is the process? Does it vary based on contract type?

Some thoughts for your consideration.

1. Having an FPRA does not relieve the contractor from the necessity to provide accurate, complete, and current cost or pricing information if the cost estimate is valued at $2 million or more. (FAR 15.403-4, and provision 52.215-10, as modified by recent Class Deviations). Thus, it is very likely your company will be required to disclose the impact of the additional business base to your indirect rates.

2. To my knowledge, you do not need DCMA's "permission" to update your existing FPRA based on new circumstances.

3. The rate calculation is not normally the full impact of the contract award, because you may not win. Normally, the win probability ("pwin") is used to factor down the impact. For example, if you are looking at potentially tripling your business base but the pwin is only 30%, you would only add one-third of the maximum award to your base.

4. Contract type doesn't matter but if you are going to stick with the former (higher) FPRA rates for your FFP bids (to protect margin) and are going to use your "win-only" rates for cost-type proposals, then you may be leaving yourself open to the allegation of defective pricing.

5. if the government is performing a cost realism analysis then your disclosed pwin-adjusted rates should be used by the evaluators, regardless of what the FPRA rates are.

Hope this helps.

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11 hours ago, here_2_help said:

if the cost estimate is valued at $2 million or more.

Not until July 1. We're still in the old days.

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1 hour ago, Don Mansfield said:

Not until July 1. We're still in the old days.

The Class Deviation says 1 July. The statute says 18 June. In either case, it takes a bit of time for a contractor to prepare and submit a proposal.

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