According to 119 STAT. 3136 PUBLIC LAW 109?163?JAN. 6, 2006, a "pass through charge" is defined as follows:

The term ??pass-through charge?? means a charge for overhead or profit on work performed by a lower-tier contractor (other than charges for the direct costs of managing lowertier contracts and overhead and profit based on such direct costs) that does not, as determined by the Secretary for purposes of this section, promote significant value added with regard to such work.

Does "overhead" include G&A?

How does one determine what "does not not promote significant value added"?

In the context of this statement, I'd say overhead does include G&A.

Few things to consider for providing significant value. I'm sure others will give you more ideas too.

- If all the prime is doing is entering subcontractor costs into their accounting system and then sending you an invoice, they're not adding significant value.

- Is the prime performing project management tasks associated with the work of the sub?

I'd like to know why the original question referred to the statute and not to the implementing regulation(s). I believe that both the (now defunct) DFARS rule and the current FAR rule refers to "indirect costs" and does not make any further distinctions. Is somebody looking for a rule nullification because of a conflict with statute? If not, I think it's clear that all indirect costs allocated to the subcontractor (except for those associated with subcontract management functions) are subject to disallowance.

Hope this helps.

I'd like to know why the original question referred to the statute and not to the implementing regulation(s). I believe that both the (now defunct) DFARS rule and the current FAR rule refers to "indirect costs" and does not make any further distinctions. Is somebody looking for a rule nullification because of a conflict with statute? If not, I think it's clear that all indirect costs allocated to the subcontractor (except for those associated with subcontract management functions) are subject to disallowance.

Hope this helps.

Yes it does. Thank you.