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here_2_help

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  1. Thought I would add that there is a case that may be on point regarding what is "normal" in this context. See ASBCA Nos. 47416, 50453, 50888, United Technologies Corporation, Pratt & Whitney, July 30, 2001. (Subsequently reversed on appeal.) The following is from a recitation of the facts. Emphasis added. Citations omitted. Redaction in the original.
  2. "Is it normal?" No. But it happens. When it happens, the prime needs to be very careful, because contract clause 52.203-7 is in play. Have you read that clause?
  3. You're not Atlas Telemon. You're not required to fix what's wrong with contracting today. Nobody can. The best most of us can do is to help our colleagues with their individual challenges. Your writings influence judges. That makes you a Titan, but you still can't fix what's wrong with contracting today. That's an unreasonable aspiration. I'm not going to respond anymore. You wanna talk further, we both have each other's email addresses and phone numbers.
  4. No, it's not. That's not the answer. Your input is far too valuable.
  5. I'm going to address the tone of this thread, and not the content. I'm not looking for a response; feel free to move on. People are frequently in over their head. People are frequently clueless in the eyes of more experienced people. That's just reality. My boss asks me hard questions all the time. Quite often I have no clue about the right answer. But because I have 30 years of experience, I know where to look for answers. More importantly, I am comfortable telling my boss "I don't know" and suggesting that Legal be called. (I'm not allowed to call Legal. Long story.) My point is that not everybody has my level of comfort in admitting ignorance. Speaking generally, we are failing at training the next generation on what to do when they are given a question or a task for which they are unqualified to tackle. We don't give them options. The truth is that very few people are comfortable admitting ignorance on a topic that may not be within their subject matter expertise. We can debate why that might be but I'm convinced it's the truth. Clint Eastwood's Dirty Harry character said: "A man's got to know his limitations," but that's a very hard thing to learn. So, given that people (generally) are reluctant to admit ignorance on a topic, what is next for them? People come to WIFCON because it's what's next for them when they need help. Calling them clueless is not helpful. Telling them to read a specific contract clause, or to look of a particular legal decision, is helpful.
  6. As I posted, I've seen this before and it worked for the non-DoD contractor. The company allocates the draw in accordance with the time card. Does the owner record time for G&A activities (i.e., managing the company?) What about holidays, sick time, vacation time? Because if the other time isn't being recorded, then there may be an argument that the "cost" is actually inflated because some amount of the draw should be going to places other than the contracts being charged. Yes, you won't find much guidance because (repeating myself) this situation is by far not the preferred practice. The owner is listening to the tax experts but the owner should be listening to the cost accountants. Shrug. You still have to do the best you can do with a sub-optimal situation.
  7. This is by far not the preferred practice ... but you know that already, right? I have seen small businesses do what you describe -- count the owner's draw and bonus as labor expense. I've seen them get away with it thru an audit. (FYI: not a DoD contractor.) You want to treat the draw as direct labor, but how do you apportion the "labor expense" to individual contracts? Did the owner fill out a time card? Doubtful. You don't say whether the company has any cost-type contracts; if it does, I would absolutely not recommend distributing the draw to contracts with zero support for doing so. Even if the company only has FFP contracts, it's hard to imagine compensation costs going to all contracts like peanut butter; in fact, that is almost the definition of G&A expense, isn't it? I think you will be lucky to count total owner's compensation as an indirect expense in the G&A expense pool. Unless you have support, I don't see how it can be treated as direct labor. To be clear: I think this is risky business. As I've posted before, I prefer that owners get paid a salary and that the salary be distributed via time card to all cost objectives. But since that's not possible here, I think the best you can hope for it to treat total owner's compensation as being an indirect expense. Good luck.
  8. I'm a bit unclear as to why you need this information, but I can tell you that there are many ways to calculate a wage rate. Some companies use 2,180 (52 weeks of 40 hours) and others use the actual pay divided by the actual number of hours worked (which would include both compensated and uncompensated overtime). Other companies use actual pay divided by the standard number of hours in pay period, ignoring any uncompensated overtime. Still others look for the effective hourly wage rate, based on the number of available productive labor hours (i.e., 2,080 hours less expected or actual Paid Time Off hours). There is no absolutely correct way to make the calculation. You need to do what works for you, given your circumstances and business objective.
  9. Thank you Vern, for not only writing a thorough article, but for allowing it to be shared.
  10. Vern, please read the first sentence of the Assad Memo one more time. The very first sentence. The one I quoted earlier in the thread. To your point, I don't think we really have a disagreement. We are, in the vernacular, "talking past each other." Best to you!
  11. Okay. First, I used the incorrect term. I said "directive" instead of "memorandum." I was too loose with my language. Second, I have already agreed with you regarding the distinction between directly charged proposal preparation costs and "B&P" costs. I have already agreed that there is a third category - proposal preparation costs that are required by contract but not directly charged to a contract because the contractor elects not to do so. I have pointed out that, in practice, that third category does not exist. I used the Assad MEMORANDUM to show that not even DoD makes that distinction, even though you are absolutely correct to do so. My final point was that negotiation costs may or may not be part of B&P expenses (or, for completeness. directly charged proposal preparation expenses). A contractor's policies and procedures will control the treatment (which must be consistently applied). Some contractors will treat negotiation costs as being part of proposal preparation expenses; others will not. I pointed once again to the Assad MEMORANDUM as support for the notion that DoD will accept such support expenses as being part of B&P (or, directly charged proposal preparation expenses). To be very clear: such costs as negotiation need not be charged direct, even if "required" because it is the contractor's consistent practice that will control. If the contractor does not charge negotiation expenses as part of B&P costs, then it will not charge them as part of directly charged proposal preparation expenses. Conversely, if it does then it will. That's it. Those are all my points. Everything else is loose language for which I apologize if there was any confusion caused.
  12. Yes. And to the OP's original question The answer is that the contractor's own policies/procedures should define when costs associated with, but not directly a part of, proposal preparation and submission are charged to the B&P project and when they are not to be so treated. Shay Assad's directive, link provided earlier in the thread, provides that DoD will accept contract negotiation costs as being B&P costs, so long as the contractor treats them that way consistently.
  13. Yes, true. Am I understanding your position as being that, since CAS is not applicable to the contractor, then the permissive cost accounting practices described by CAS are not available to the contractor?
  14. Vern, I don't know how my comment morphed in your mind from "mimic[king] the legal profession" to "thinking like a lawyer." I don't think those two phrases are equivalent. In my personal experience, the vast majority of lawyers do not focus on cost or accounting issues. The comparatively few that do, and do it well, become legends in their fields. Mel Rische and Karen Manos and Tom Lemmer spring immediately to mind - though of course there are others. Further, in my personal experience, too many attorneys are risk averse, seeking to eliminate risk rather than to manage it. Again - not all attorneys. But many. Anyway, I, too, am an Associate Member of the ABA, Section of Public Contract Law. I have been for two decades. In that capacity, I've attended meetings and presented a paper at a Quarterly meeting and contributed to a Section publication. Just so that we're clear that my statement was not an indictment of the legal profession.
  15. Yeah, I think it's basically a general ignorance of deep CAS stuff and related accounting issues. The more the KO function mimics the legal profession, the less actual business acumen seems to matter. That's a purely personal opinion, of course. I'm sure there is a myriad of exceptions to my generalization.
  16. Yes. I was replying to Vern's implied point that a contractor who elects not to charge proposal preparation costs as direct contract costs might technically not be permitted to recover such costs as B&P costs, since they are "required" by a contract even if not directly charged to that contract. CAS might require such costs to be excluded from the B&P pool and allocated separately to the (in this case, singular) benefiting contract or other final cost objective. My point to Vern was that he was technically correct; however, in practice, nobody worries about that nuance. I used Mr. Assad's memo as an example of nuance ignored.
  17. No, you're not wrong, though in practice nobody really ever makes that distinction. It's simply a choice between direct contract costs and B&P. See, for example, the first sentence of Shay Assad's 10 Nov 2011 Memo "Direct and Indirect Charging of Contractor Proposal Preparation and Negotiation Support Costs". Again, you're not wrong, but it's CAS stuff, so nobody pays much attention to the nuances.
  18. If the proposal is required by contract terms, then the contractor may elect (it is not required to) charge proposal preparation costs as direct contract costs. (See CAS 401, Interpretation No. 1.) However, the contractor's choice must be applied consistently to all contracts in similar circumstances. Note that directly charged proposal preparation expenses are not B&P costs, because they don't meet the definition of B&P found in the cost principle. They are just direct contract costs. When I explain this to folks, I tell them that it's easy to distinguish required proposals from proposals that are not required. Is the proposal a contract deliverable? Can the contractor be found to be in breach for failing to submit it? Or is the submission discretionary? Answers to those questions generally tell folks what's required, and what's not required.
  19. Thank you for the link. I believe I knew the rule intuitively, but it was very nice to see it explained authoritatively. How did I know it intuitively? Genetics. My mother was an English teacher for 40 years. Thanks, Mom. 😄
  20. Speaking from the contractor's viewpoint, many contracting officers are ill-prepared to engage in such discussions. Many (not all!) don't have the critical analysis skills to understand things like carrying cost, imputed interest, inventory valuations, and the like. Frequently, when a contractor attempts to raise those points, the response is not a reasoned analysis; the response is: "No. Because I said so." It can be disheartening to spend the time & effort to prepare an in-depth analysis in support of proposed pricing, only to be told "no" in such a way that one can be sure the other party didn't bother to think about what had been presented.
  21. I'm sorry. I see these stories--or ones like them--nearly every single day. Along with plea agreements, deferred prosecution agreements, and the like. I don't think there is anything to be done about the situation. At least, I am unable to come up with anything else that can be done.
  22. Breaking Defense (2/23, Gill) reports that when it “comes to landing defense contracts, non-traditional defense firms, including startups, have so little chance against the towering traditional primes that there is ‘no fair competition,’ according to blunt remarks from” Anduril Industries Chief Revenue Officer Matthew Steckman. During a panel discussion at the WEST 2022 conference last week, Steckman said, “I would love someone to do a study to figure out how many open competitions are wired for a winner ahead of time before that solicitation ever hits the light of day. … It’s got to be 85%, right? … There is no fair competition.” Steckman described how he would “do things if he were the Pentagon, including forcing competitions to include the fielding of technology and the ‘actual demonstration of something real in the world,’ as opposed to theoretical tech or designs.” Steckman also said, “I would pour a tremendous amount of money into the winner. … I wouldn’t sort of skirt around and do innovation theater and write million dollar checks here or there.”
  23. It was one of the GovtCon accounting firms that do consulting. I don't believe the briefing was recorded. As to why -- high attrition in general, including retirements.
  24. Most of the rhetoric after the acquisition reform efforts of the 90's focused on taking discretion away from contracting officers and ensuring "consistency." See, e.g., Schooner's Fear of Oversight: The Fundamental Failure of Business-Like Government. Portions of the abstract are quoted below.
  25. I attended an industry briefing a couple of weeks ago, where it was reported that labor bases are down across the industry. Accordingly, indirect rates are on the rise. To answer your question: No. There are no limits on the indirect rates that may be bid or billed.
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