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Applying OH on Affiliate Cost (We are an SSA, selling into US Market)

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I am fairly new to international companies. We just set up an SSA and I have several "sister" companies who will be subcontractors to us and need help in making sure that we do this right!

Specific question on my plate: Our sister was a subcontractor to a large prime. Once the SSA was set up (earlier this year), we novated the contract to the SSA and now our sister is our subcontractor. We want to charge the sister Material & Handling/G&A of say, 18%. I have support for the rate, but are we able to burden the cost from our "sister sub"?

95% of our work will be us as "Prime" and sister companies as "subcontractor". We have no facilities, just our OH (Contracts, PM, Legal, B&P, Sales and Market, Finance, etc) How should we set up IC trading rules for this type of activity?

Thanks, Mark

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I am fairly new to international companies. We just set up an SSA and I have several "sister" companies who will be subcontractors to us and need help in making sure that we do this right!

Specific question on my plate: Our sister was a subcontractor to a large prime. Once the SSA was set up (earlier this year), we novated the contract to the SSA and now our sister is our subcontractor. We want to charge the sister Material & Handling/G&A of say, 18%. I have support for the rate, but are we able to burden the cost from our "sister sub"?

95% of our work will be us as "Prime" and sister companies as "subcontractor". We have no facilities, just our OH (Contracts, PM, Legal, B&P, Sales and Market, Finance, etc) How should we set up IC trading rules for this type of activity?

Thanks, Mark

Hi Mark,

FAR 31.205-26(e) requires that (unless certain exceptions exist) costs transferred between divisions under common control must be made on the basis of "actual costs" (which include all applicable burdens from the performer). Whether the recipient applies indirect burdens depends on its disclosed/established practices. Generally, the answer is yes.

In particular, current DCAA audit guidance is biased heavily towards the receiver applying G&A to the performer's fully burdened costs.

Hope this helps.

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Hi Mark,

FAR 31.205-26(e) requires that (unless certain exceptions exist) costs transferred between divisions under common control must be made on the basis of "actual costs" (which include all applicable burdens from the performer). Whether the recipient applies indirect burdens depends on its disclosed/established practices. Generally, the answer is yes.

In particular, current DCAA audit guidance is biased heavily towards the receiver applying G&A to the performer's fully burdened costs.

Hope this helps.

H2H, I know that I responded to this today! I thanked you for your quick reply and stated that I had used that basis for my decision. Some are questioning (the International Group) and I think that I need more information to understand the specifics. But I really do appreciate your fast response this afternoon, it really helped me! Mark

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