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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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