We are a small business. We work hard to keep our indirect costs low in order to be competitive. Recently we have seen a number of RFPs in which there is no labor category for a Program or Project Manager.

One Army IDIQ RFP specifically calls for bidders to provide a Program Manager with defined tasking. When we asked why “Program Manager” was not among the 53 labor categories defined in the RFP, the government's answer was: “It is expected that the Program Manager referenced in . . . will be a corporate position, chargeable to G&A/overhead."

Is this appropriate? Why should all of our other clients pay for the Program Manager who supports this project (through increased indirect rates)? What recourse or alternative do bidders have to respond to situations like this where the requirements seem to be at odds with generally understood direct / indirect charging principles?

I have written this into competitive RFPs previously. I have also heard the frustration from industry that goes along with that. Some Contracting Officers are adamant that regardless of your accounting methodology in order to conform to the requirements of the contract the offeror must propose this as an overhead position. This is usually because the Program Manager's position is expected to be spread across a number of projects, whereas sometimes the Project Manager may be a dedicated 2,080 direct charge to the project if the project warrants such support due to the magnitude.

Personally, I think that if the RFP is competitive then that will ensure cost efficiency. However, the Government can require this.

joehoman3,

You have a couple of choices here.

1. Charge all PMs to an indirect cost pool and allocate that pool to all contracts that require PMs.

2. Charge the PM for this proposal to the contract but do not plan to get reimbursed for the costs.

For an out of the box approach, consider distinguishing PMs that manage ID/IQ or Requirements type contracts from those that manage CP or FP type contracts, then pool just those PMs and allocate back to the benefiting contracts.

What you cannot do is treat this ID/IQ contract differently from your other contracts. While you are exempt from CAS (as a Small Business), you still have to comply with FAR cost principles' definition of direct / indirect.

Hope this helps

joehoman3,

You have a couple of choices here.

1. Charge all PMs to an indirect cost pool and allocate that pool to all contracts that require PMs.

2. Charge the PM for this proposal to the contract but do not plan to get reimbursed for the costs.

For an out of the box approach, consider distinguishing PMs that manage ID/IQ or Requirements type contracts from those that manage CP or FP type contracts, then pool just those PMs and allocate back to the benefiting contracts.

What you cannot do is treat this ID/IQ contract differently from your other contracts. While you are exempt from CAS (as a Small Business), you still have to comply with FAR cost principles' definition of direct / indirect.

Dear here_2_help:

Your first choice is completely unacceptable since we have multiple contracts with direct charge PMs. Our standard practice is to have all people who directly support a project (including PMs) charge direct to the contract that benefits from their efforts. Switching all PMs to indirect cost pools doesn't make financial or logical sense.

Your second choice is viable, but unfair and unsound financially because the direct charge, but unbillable time would come straight from profit. Why should only this program absorb PM time out of profit?

Your final comment pretty much makes my point for me. We do not want to treat this IDIQ contract different from our other contracts. We want to be consistent in how we charge PM time. We want to comply with FAR cost principles and cleanly pass DCAA audits. We do not think it is appropriate to charge the PM for this contract differently than every other PM on every other contract in the company. Yet the government is telling us we must charge the PM for this program to an indirect cost pool.

I certainly appreciate your note that we are exempt from CAS. But, if any defense contractor deviates from normal business practices and standard direct / indirect charging rules - is an acceptable answer "well, that's the way the RFP / contract was written and the government forced us to charge our time differently?" Would DCAA accept that reason for being inconsistent if that was uncovered in an audit?

Confused and frustrated...

One Army IDIQ RFP specifically calls for bidders to provide a Program Manager with defined tasking. When we asked why “Program Manager” was not among the 53 labor categories defined in the RFP, the government's answer was: “It is expected that the Program Manager referenced in . . . will be a corporate position, chargeable to G&A/overhead."

Just out of curiosity, what is the contract pricing arrangement? Fixed-price, T&M, cost-reimbursement?

The RFP says that the government expects that offerors to charge the PM in a certain way, but it doesn't say offerors must do it that way. At least, that's not how I interpret it. The government cannot tell you to charge a direct cost as indirect, since that would violate FAR 31.202, unless done pursuant to FAR 31.202( b ) and the CAS. I don't think a PM's salary is a "minor dollar amount". Are you saying that the government is making that approach a condition of proposal acceptability?

If not, why not include the cost of the PM in the labor rates for the other labor categories? Handle it as an "overhead" rate within the contract. You can allocate that cost to all 53 labor categories, or to a selection of them, based on the IDIQ minimum amount, unless that amount is ridiculously low, in which case you can do it based on some estimated amount. That way, you will charge the cost of the PM directly to the contract by allocating it to other contract costs.

Just a thought. here_2_help, what do you think?

Vern,

That's a great suggestion and one I have seen successfully used (albeit more than a decade ago).

The point is that joehoman3 has more options available than he realizes. He's a small business so he may not have access to top-notch advice, but clearly the company would benefit from such.

H2H

Vern,

I looked up FAR 31.202 - Direct Costs and it looks very straight-forward like you say. I wonder what happens when a cost that could go either way (direct or indirect) is specifically required by a DoD customer to be allocated direct, but has previously always been allocated indirect by the defense contractor. I am thinking specifically of DBA insurance. If the following provisions are met, do you think the contractor is justified in following the customer's requirement for charging DBA insurance direct as an ODC?

1) A different overhead rate is developed for the contract/program that excludes all DBA insurance cost from its overhead pool,

2) The directly allocable DBA insurance is separately accumulated and clearly identified on any contract billings, and

3) A revised disclosure statement is submitted that documents all these changes to meet the customer's requirement.

Given the above provisions, would the customer also need to process a deviation from FAR part 31.202, and, is that even possible? I want to do things "by-the-book" and am thankful for people like you and H2H that have so much experience.

INoW, you might check out the provision 52.230-7.

H2H

Thank You, H2H!