Material Costs 31.205

[Whynot]

Hypothetical Situation

Here goes?

I have a cost reimbursable contract that I will need to purchase and use an item in its performance. The government has placed a restriction on my reimbursement of this item at my purchase cost (Material Cost 31.205) ? no indirect costs or profit, regardless if it is commercial or not.

However, the government has placed no restriction on how I choose to account for this item. I can 1) expense it and have the government reimburse my purchase cost, or 2) capitalize it and charge the government monthly depreciation, or 3) I can rent it to the government and charge the government monthly rental, or 4) and I can sell it to a bank and lease it back from the bank and charge the government my lease costs, or 5) anything else (looking for suggestions).

My question is:

Under the scenarios other than scenario one, is it possible to have a different underlying value of the item other than purchase cost ? something like fair market value? Is this inconsistent with the (Material Cost 31.205)? Can I separate myself from the Material Cost in using these other methods?

Make whatever assumptions are necessary to support your response.

This contract is not subject to CAS and I don?t have a disclosure statement.

Thanks

[here_2_help]

I have a cost reimbursable contract that I will need to purchase and use an item in its performance. The government has placed a restriction on my reimbursement of this item at my purchase cost (Material Cost 31.205) ? no indirect costs or profit, regardless if it is commercial or not.

My question is:

Under the scenarios other than scenario one, is it possible to have a different underlying value of the item other than purchase cost ? something like fair market value? Is this inconsistent with the (Material Cost 31.205)? Can I separate myself from the Material Cost in using these other methods?

This contract is not subject to CAS and I don?t have a disclosure statement.

Thanks

Insufficient information to meaningfully respond to the question. You don't provide information regarding contract clauses included/excluded, whether DFARS supplemental cost principles apply, the dollar value of the item, your company's capitalization thresholds, how you treat similar items in similar circumstances, etc.

Whynot, my advice is to consider investing in an expert-level government contract cost accountant and/or attorney. Yes, such folks are expensive. In this situation, I think such an investment is warranted. Plus you can use the "relied on expert advice" defense to try to avoid culpability in the litigation that may well result from getting this one wrong.

Hope this helps.

[X DCAA]

If I am reading this correctly. The government awarded you a CPFF contract that does not allow any burdens of any sort. Assuming that is what you are saying, here you go.

You can only account for the cost of the material, your entire second paragraph is crazy.

If the contract says materials without burden, that is what it means, you get your material at cost.., and that is it. This happens more often than you think, so it is not like you have some unique situation here. It mostly happens on T&M, but for some reason, the KO stuck it in this one..,

Do not get too wrapped up in this one, its pretty easy.

[Jacques]

XDCAA, your post doesn't seem responsive to the original post. Are you claiming that regardless of accounting scenario, the results are invariably the same? Or are you saying the other scenarios are somehow irrelevant? Please explain and (dare I ask) support.

[mrbatesville]

Not to get off topic but I have a similar question but applicable to FFP/Construction project. The KTR submitted a schedule of values to include a deposit on material. The material is not going to be stored off site in this case so the material clause does not apply. However, the material (specialized tank) is a valid and legitimate item but the question is how can we address the line item on the SOV with this not being a cost reimbursement type contract? Will with KTR have to eat the start up production cost and bill once the unit is installed?