This document discusses indirect rates for government contractors. It begins by introducing the presenter and their experience. The objectives are then outlined as understanding common cost pools, indirect rate structures, intermediate and advanced cost pools, and allowable allocation methods. Common cost pools are described as fringe, overhead, and G&A. More complex structures with multiple fringe and overhead pools and intermediate cost pools are also discussed. Finally, allowable allocation methods for fringe, overhead, and G&A like labor dollars, hours, and total cost input are covered.

1. Building GovCon
Indirect Rates

2. Melissa Metzger
Government Accounting & Finance Advisor
MAFM
Meet your presenter:
• Melissa has successfully developed and
instituted compliant and efficient processes
that have saved businesses over $1.5 million
during the last 5 years.
• She has successfully managed over $100
million in annual federal funds.
Melissa-Metzger-mafm

3. Today we’ll learn:
The composition of different types of cost pools and the
allocation methods allowable for distributing those costs to
customer jobs or projects.

4. “We can complain because rose
bushes have thorns, or rejoice
because thorns have roses.”
~ Alphonse Karr
French critic, journalist, and novelist

5. Learning
Objectives
1. Know the common cost pools
utilized by government
contractors
2. Identify the need for complex
indirect rate structures
3. Learn more about
intermediate and advanced
cost pools
4. Know the allowable allocation
methods for indirect rates

6. List Common Cost Pools
• Fringe
• Overhead
• G&A

7. Fringe
The costs of maintaining employees
• Employer taxes
• Health insurance
• Retirement
• Other benefits

8. Overhead
The costs of supporting customers or products
(Costs not attributable to a single customer or product)
• General support, bug fixes
• Training
• Idle time
• Facilities

9. General & Administrative (G&A)
The costs of operating a business
(Costs you would incur regardless of customers)
• Accounting
• Business development
• HR
• IT
• Legal

10. Identify Need for
Complex Rates
• Reduced profitability
• Loss of competitiveness in rates
• Growing or expanding business
 Add divisions or product lines
 Better fidelity in rates
 Varying cost drivers

11. Describe Advanced Cost
Pools
• Multiple fringe
• Multiple overhead
• Intermediate cost pools
• Materials & subcontract handling
(M&SH)

12. Multiple Fringe
• SCA vs non-SCA
• Commercial vs government
• Different plans for different classes of employees

13. Multiple Overhead
• By location
 Multiple offices
• By division (manufacturing vs engineering)
• Contractor vs government/customer site

14. Intermediate Cost Pools
• Facilities
 Rent
 Depreciation
 Utilities
 Taxes
 Insurance
 Maintenance
 Telecom/Internet
• Allocated over square footage

15. Intermediate Cost Pools
• IT
 Salaries
 Equipment
 Enterprise software
 Depreciation
 Maintenance
 Telecom/Internet
• Allocated over # of devices or # of network connections

16. Allowable Allocation
Methods
Fringe
(Allocated over all W-2 labor)
• Labor dollars – most common and reduces
variances
• Labor hours

17. Allowable Allocation
Methods
Overhead
• Units of production
• Direct labor dollars
• Direct labor hours
• Direct material costs
• Prime costs
• Machine hours

18. Allowable Allocation
Methods
G&A
• Total cost input (TCI) – most common
• Value added
 = TCI minus material and subcontract costs
 Required when utilizing M&SH

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20. Discussion
and Q & A

21. Melissa R. Metzger
MAFM
melissa@leftbrainpro.com
Robert E. Jones
CPA, CPCM, NCMA Fellow
robert@leftbrainpro.com