Posted August 15, 2024Aug 15 comment_85855 We have a subcontractor that submitted a rate variance invoice to us in August 2024, for FY 2019 - FY 2023. The CPFF contract ended in 2023 and we are preparing close out and need to bill the government for these subk rate variance costs. When billing the customer, do we burden the Rate Variance invoice with our FY 2024 rates, since that is when the invoice was received? Or, do we need to burden their rate variance for FY 2019 with our FY 2019 rates, their FY 2020 with our FY 2020 rates, etc. The latter would be very complicated, so I am curious how others have handled such a situation.
August 16, 2024Aug 16 comment_85867 Why is the latter so complicated? If you know what your rates were and what their costs were in each year, I think that it shouldn’t be too difficult to burden those costs accordingly. It’s five calculations… It would seem to be a more accurate representation of the actual contract costs for those years. I read your initial post as that the sub has provided adjusted rates for each year. I imagine that @here_2_help (H2H) can advise you here whether you apply your current rates to the current invoice or adjust for the adjusted yearly costs accordingly.
August 16, 2024Aug 16 Author comment_85869 Thanks for the response Joel. I am not saying splitting over several years is too difficult, it could be done, it would just require several entries instead of a single entry. Although, I am not clear how I would then present that on our 2024 ICS, since these costs will show up on our 2024 ICS.
August 16, 2024Aug 16 comment_85874 20 hours ago, KMN said: We have a subcontractor that submitted a rate variance invoice to us in August 2024, for FY 2019 - FY 2023. ... When billing the customer, do we burden the Rate Variance invoice with our FY 2024 rates, since that is when the invoice was received? Or, do we need to burden their rate variance for FY 2019 with our FY 2019 rates, their FY 2020 with our FY 2020 rates, etc. The latter would be very complicated, so I am curious how others have handled such a situation. These are contract costs in the year they are received and recognized by your accounting system, unless you accrued for them earlier. (Doubtful but possible.) Apply the current year rates to the subcontractor invoiced costs you have received. I hope you have sufficient funding to cover the additional subcontractor costs. If not, you would need to argue that the costs were not reasonably foreseeable in order to show why you didn't submit the required Limitation of Cost notification ahead of time. Finally, there is a lesson here about proper subcontractor oversight and management. If you were unaware of the incoming rate adjustment costs, ask yourself why. (If you knew you should have accrued for them.) Why are you not communicating with your subcontractors, such that you would understand their current final billing rate status and probable rate impacts to your contract? In my experience, far too many primes simply don't manage the financial aspects of their subcontractors, even in a full EVM situation. I wish that was not the case, but it is.
August 16, 2024Aug 16 comment_85876 22 hours ago, KMN said: The CPFF contract ended in 2023 and we are preparing close out and need to bill the government for these subk rate variance costs. Do you have final rates for the years in question (FY 2019-23)? If they are final rates, how did you establish those rates without fully accounting for what should be base costs for those years? When you say FY 2024 rates are you referencing final rates or provisional rates? Finally, why would you use out of period costs for a contract that ended a year ago? I disagree with H2H on that point. In my view, you should use the rates for the years covered by the contract to adjust your billing to the government because there is no apparent relationship between your FY 2024 rates and the contract that ended in 2023. See FAR 31.201-4 for the rules on allocation of costs to contracts.
August 20, 2024Aug 20 comment_85914 The relationship between FY 2024 rates and the contract that ended in 2023 is that is the current administrative rate that is required to process those Subcontractor Rate Variances in the current year. Furthermore, the direct costs of the Subcontractor prior year rate variance will go into the current year base to calculate the current year rate.
August 23, 2024Aug 23 comment_85983 On 8/20/2024 at 1:00 PM, KtrsAcctg said: that is the current administrative rate that is required to process those Subcontractor Rate Variances in the current year. Required by what?
August 30, 2024Aug 30 comment_86070 It is the cost of the accountant's labor to process the SubK rate variance in the current period.
August 30, 2024Aug 30 comment_86072 58 minutes ago, KtrsAcctg said: It is the cost of the accountant's labor to process the SubK rate variance in the current period. I don't get it. We are taking about what prime contractor rates should be used to bill the government for subcontractor costs rate variances under a prime contract that ended in 2023. I still do not see any causal or beneficial relationship between prime costs incurred in 2024 and a contract that ended in 2023.
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