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We have a prime contract that is FPLOE on labor and Cost Reimbursable on ODCs and Travel.  We have a subcontractor who wants to apply G&A on their travel expenses, and based on the contract type we extended them - T&M (included FAR Clause 52.216-7), we have to allow them to apply that G&A on the travel.   This is the first time we will be applying G&A to travel.

Two questions:

  • What G&A rate do I apply on the travel when invoicing the government? Our G&A rate as prime, or the G&A rate that the subcontractor applied to the travel?  If the prime G&A rate is applied, how does it work with the subcontractor if the subcontractor's G&A rate is higher than the prime's? 
  • Even though the labor CLINs are FPLOE, if we apply G&A to travel, will we be required to submit an Incurred Cost Submission next year? 
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Hi Caitlin -

If you've allowed the sub to include G&A on travel, then it's the sub's G&A rate that would be applied.  This is the cost to you, the Prime, which is what is then passed to the government.

Applying the sub's G&A to travel does not impact whether or not you need to submit an incurred cost submission.  However, I'm not familiar with the specifics of your contract, so you will want to get clear with your contracting officer to understand whether you have ICS requirements on the travel line or not.  My guess is that they would have structured the contract in such a way to avoid an ICS on this piece, but you'll want to clarify.

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2 hours ago, Patrick Mathern said:

Hi Caitlin -

If you've allowed the sub to include G&A on travel, then it's the sub's G&A rate that would be applied.  This is the cost to you, the Prime, which is what is then passed to the government.

Applying the sub's G&A to travel does not impact whether or not you need to submit an incurred cost submission.  However, I'm not familiar with the specifics of your contract, so you will want to get clear with your contracting officer to understand whether you have ICS requirements on the travel line or not.  My guess is that they would have structured the contract in such a way to avoid an ICS on this piece, but you'll want to clarify.

Thanks so much, Patrick! This is so helpful!

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21 hours ago, Caitlin W said:

What G&A rate do I apply on the travel when invoicing the government? Our G&A rate as prime, or the G&A rate that the subcontractor applied to the travel?  If the prime G&A rate is applied, how does it work with the subcontractor if the subcontractor's G&A rate is higher than the prime's? 

Has anyone answered those questions? Is the application of G&A a matter of either the sub's or the prime's?

Couldn't the prime apply its G&A to the sub's costs, which include the sub's G&A? Isn't the prime's G&A part of its allowable costs? Patrick seems to say that only the sub's rate applies. Is that true?

I'm asking, not arguing.

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2 hours ago, Vern Edwards said:

Couldn't the prime apply its G&A to the sub's costs, which include the sub's G&A? Isn't the prime's G&A part of its allowable costs? Patrick seems to say that only the sub's rate applies. Is that true?

Yes. Yes. The subs G&A rate only applies to the sub. 

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Thanks, Neil, but I knew that the sub's G&A rate applied to the sub's travel costs.

The sub's travel costs include the direct costs of travel plus its G&A costs.

What I want to know is whether the prime may apply its own G&A rate to the sub's costs, which include the sub's G&A. So that the prime submits a request as follows:

Prime's request for payment = (Sub's direct travel costs + Sub's G&A) + (Prime's G&A).

Patrick's response, with which here_2_help agreed, seems to indicate that the prime cannot add its own G&A in its request for payment from the government.

 

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1 minute ago, Vern Edwards said:

What I want to know is whether the prime may apply its own G&A rate to the subs costs, which include the sub's G&A. So that the prime submits a request as follows:

Prime's request for payment = (Sub's direct travel costs + Sub's G&A) + (Prime's G&A).

"It depends."

It depends on what G&A allocation base the prime contractor uses. And it depends on whether or not the prime contractor is subject to the requirements of CAS 410 -- i.e., subject to "Full" CAS coverage.

Assuming CAS 410 is applicable:

  • In a Total Cost Input (TCI) base, then yes--absolutely the prime must apply G&A to all of its subcontractors' costs, including Travel.
  • In a Value-Added Base, then no -- absolutely the prime must not apply G&A to any of its subcontractors' costs.
  • In a Single Element G&A base, then whether G&A is applied will depend on what cost element the prime has chosen as its G&A allocation base.

If CAS 410 is not applicable, then the prime is only required to elect a G&A allocation base and then use it consistently. The prime would have a wide latitude in possible allocation bases; the one chosen need not be among the three required by CAS 410.

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Thanks, H2H! Caitlin took off without getting an answer to her first question, which was:

On 10/14/2021 at 10:55 AM, Caitlin W said:

What G&A rate do I apply on the travel when invoicing the government? Our G&A rate as prime, or the G&A rate that the subcontractor applied to the travel?  If the prime G&A rate is applied, how does it work with the subcontractor if the subcontractor's G&A rate is higher than the prime's? 

The question was muddled, but maybe Patrick interpreted it differently than I did. It appears to me that she thought there could be only one application of G&A to the direct travel costs. Maybe that's not what she meant. She took off, seemingly satisfied, and your response answered my question.

Thanks again.

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  • 6 months later...

Is a prime contractor required to allow a subcontractor to bill G&A on travel or is this negotiable? I have a subcontractor who wants to submit receipts over $75 directly to the governement so as not to disclose their indirect rate to us. They are only requesting to submit receipts, not invoices, directly to the government. I would prefer to tell them if they want to add G&A, they will have to identify the G&A on their invoices to us as the prime contractor but am not sure what the best aregument for this would be. We are a small business; our subcontractor is large business; and this is a new situation for me Thank you for any suggestions yiu can provide.

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On 5/10/2022 at 6:50 PM, Susan P. said:

Is a prime contractor required to allow a subcontractor to bill G&A on travel or is this negotiable? I have a subcontractor who wants to submit receipts over $75 directly to the governement so as not to disclose their indirect rate to us. They are only requesting to submit receipts, not invoices, directly to the government. I would prefer to tell them if they want to add G&A, they will have to identify the G&A on their invoices to us as the prime contractor but am not sure what the best aregument for this would be. We are a small business; our subcontractor is large business; and this is a new situation for me Thank you for any suggestions yiu can provide.

I don't understand how receipts for expenses in excess of $75 relate to the application of G&A on travel expenses. Receipts are support for claimed expenses, while G&A is an indirect rate that is billed on invoices. Can you please help me to understand how the two things are connected in your mind?

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Susan,  Additionally, please tell us the contract type (e.g., FFP, CPFF, T&M...) of your prime contract with the government and the contract type of your subcontract with the large business.

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On 5/10/2022 at 6:50 PM, Susan P. said:

I have a subcontractor who wants to submit receipts over $75 directly to the governement so as not to disclose their indirect rate to us.

Generally speaking this really makes me wonder.   Unless the prime contract with the federal agency, or your subcontract in some way allows or otherwise provides a direct contractual relationship between the subcontractor and the government there is no privity of contract between your sub and the government.  While I get that sub may be concerned about divulging their indirect rate to you as the prime bluntly I say too bad.  The sub had the opportunity to address their concern with you when they received their subcontract.   To now wish for some work around to where they deal directly with the government makes no sense to me.   Others may chime in and provide where it would make sense but I really think it has to be a contractual stipulation otherwise I would simply tell the sub - Nope not happening.

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As I understand it, the LB sub wants G&A on the travel but doesn’t want the prime to know the rates. Therefore, they must be thinking of invoicing the contractor some type of lump sum amount for travel. The amount would be based upon the government reviewed, detailed travel costs plus G&A = the LS invoiced amount.

This makes the government responsible for reviewing, verifying and approving (AKA auditing)  the actual subcontractor travel, which is the prime’s responsibility.

If the sub provided the prime the direct cost information to verify and approve, the prime will know what the difference in payment to the sub for the travel is (reflected in the  total cost to the contract)  vs. the direct travel costs.

 

 

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On 5/10/2022 at 6:50 PM, Susan P. said:

Thank you for any suggestions you can provide

My suggestion is to review the subcontract for language controlling billing/payment/invoices. If that language prohibits them from doing so, reject the invoice and explain the rationale. If not, and your company retained the contract right to examine its books and records, you may seek approval from the sub to engage a 3rd party to verify correctness of the invoice, provided the 3rd party signs an agreement with the sub not to disclose G&A details.  

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On 5/10/2022 at 6:50 PM, Susan P. said:

I have a subcontractor who wants to submit receipts over $75 directly to the governement so as not to disclose their indirect rate to us.

If I were the CO I would refuse to accept invoices, vouchers, or "receipts" directly from a subcontractor, especially if the prime contractor has not seen them.

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On 5/12/2022 at 5:03 AM, ji20874 said:

Susan,  Additionally, please tell us the contract type (e.g., FFP, CPFF, T&M...) of your prime contract with the government and the contract type of your subcontract with the large business.

I'd like to thank everyone for responding. I'm new to this forum and just now read all of the responses. The contract is an IDIQ. Task Orders may be issued on a Firm Fixed Price (FFP) and Cost Reimbursement (CR) basis. Imhave 11 subcontractors on this and the contract type is flowed down to the subcontracts. This particular subcontract is still being negotiated so I have not made a commitment concerning the requested change that would allow this subcontractor to submit receipts exceeding $75 directly to the Contrating Officer.  The  subcontractors proposed when our proposal was submitted to the governement had to be approved in accordance with thee solicitation and are identified in the base prime contract that was awarded to us. 

I hope I have answered everybody's questions.

Thank you again.

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Does your proposed subcontractor want to bill G&A on travel on--

  1. FFP task orders;
  2. CR task orders; or
  3. Both? 

Does your proposed subcontractor want to include G&A on travel as part of its--

  1. up-front negotiation of the subcontract prices; or
  2. after award as part of the invoicing process?

Or, does your proposed subcontractor want to submit its cost and pricing data to the Government instead of the prime contractor?

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21 hours ago, Susan P. said:

I [ ] have 11 subcontractors on this and the contract type is flowed down to the subcontracts.

Why do you believe that your subcontract type has to match your TO contract type? Can you point me to the regulation or instruction that requires that?

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On 5/21/2022 at 7:54 AM, here_2_help said:

Why do you believe that your subcontract type has to match your TO contract type? Can you point me to the regulation or instruction that requires that?

Thabk you for your queswtion. I do understand that the subcontract type does not have to be the same as the prime contract type. 

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Just now, Susan P. said:

Thabk you for your queswtion. I do understand that the subcontract type does not have to be the same as the prime contract type. 

Please excuse the typos. I submit a little too quickly sometimes.

 

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On 5/20/2022 at 12:16 PM, ji20874 said:

Does your proposed subcontractor want to bill G&A on travel on--

  1. FFP task orders;
  2. CR task orders; or
  3. Both? 

Does your proposed subcontractor want to include G&A on travel as part of its--

  1. up-front negotiation of the subcontract prices; or
  2. after award as part of the invoicing process?

Or, does your proposed subcontractor want to submit its cost and pricing data to the Government instead of the prime contractor?

Thank you. To your first question, both. All travel on this contract will be cost reimbursement. So, some task orders may be FFP with cost reimbursable travel. To your second question, after award as part of the invoicing process. They only want to submit receipts that exceed $75 to the governement. It doesn't make sense to me since we will have to provide receipts when submitting invoices in WAWF. This was a request I haven't run into before so wanted to get additional views on it before telling them submitting receipts to the directly to the government would not be allowed.

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