If you’re looking for ways to be more competitive and creative in your proposal, check your rates. Inputting rates into a proposal is one thing, validating the accuracy of them is essential to increasing profitability. In this webinar, we’ll discuss the common reasons for, and the mechanics of, creating multiple rate structures and demonstrate both the single and multiple rate structures in the proposal environment.

1. The Pricing Hour:
Insights from GovCon Experts
ProPricer's Complimentary Web Series 2021

2. The Strategic Side of
Indirect Rates
CEO/President, Government
Contracts & Accounting
Expert, Left Brain
Professionals
Robert@LeftBrainPro.com
(614) 556-4415
www.LeftBrainPro.com
Robert Jones,
CPA, CPCM, NCMA Fellow

3. WhatWe Hear Clients Say
• We’re losing competitiveness in the marketplace.
• We know our rates are too high.
• Our G&A is out of control.
• We’ve been fumbling with a single rate structure for 20 years.
• We’re forced into set billing rates from our prime or our GSA
schedule.
• We don’t have visibility into cost drivers affecting our rates.

4. Why Companies Need Advanced Rate Structures
• Single overhead rate results in non-competitive (overpriced)
products or services for one division and underpriced for another
division (but who complains about that?)
• Both result in reduced overall profits.
• Growing & changing organization.
• New product/service lines.
• New operating locations.
• Mergers and acquisitions.
• Chasing large dollar opportunities.

5. Poll Question
Which is a reason companies develop multiple
indirect rate structures?
New products or services.
Growing business.
New operating locations.
All the above.
A
B
C
D

6. • Validate composition of pools & bases.
• Ensure appropriate allocation method.
• Learn about business operations.
Three Step Process
Step 1: Calculate your actual rates today.
Cont…

7. Three Step Process, Continued…
• Can you make a profit at stated/limited billing
rates minus your costs?
Step 2: Compare your rates to industry and
contract limits.

8. • Consider intermediate pools.
• How to segregate overhead?
• Do you process significant amounts of material
and subcontracts.
Three Step Process, Continued…
Step 3: Develop a strategy to restructure
your rates.

9. Intermediate Cost Pools
Facilities
• Often one part of the business occupies an unfair portion of the
building, but pays a lower allocated cost.
• Rent
• Depreciation
• Utilities
• Repairs & Maintenance
• Taxes
• Insurance
• Labor
• Allocated over square footage.
Strategy
Cont…

10. Intermediate Cost Pools, Continued…
IT/Network/Communications
• Often one part of the business utilizes an unfair portion of the IT
resources, but pays a lower allocated cost.
• Labor
• Hardware
• Software
• Communications (telephone & internet)
• Allocated over number of employees or number of devices.
Strategy, Continued…
Cont…

11. Multiple Fringe
• Separate fringe pools for separate groups of employees with
different benefits.
• Union vs. Non-Union
• Government vs Commercia (different business units or
operating divisions)
• SCA vs Non-SCA
• You must have legally defined and segregated groups of
employees.
• In other words, you cannot discriminate by violating labor
laws.
• You must have written plans that provide significantly different
benefits.
Strategy, Continued…
Cont…

12. Multiple Overhead
• Separate office locations.
• Separate operating locations (client site vs contractor site).
• Cost of employee based at client site is cheaper than
contractor site.
• Government does not like paying contractor OH for
employees based at government site.
• Separate operating divisions (manufacturing vs engineering).
• Cost of manufacturing is significantly higher than cost of
engineering or services.
Strategy, Continued…
Cont…

13. Multiple Overhead, Continued…
• Separate product or service lines.
• Cost of some products or services are higher than others.
• Special equipment, testing, coating, painting.
• Any combination of the above!
• Not uncommon for a company to have:
• Manufacturing rate
• Onsite services rate
• Offsite services rate
Strategy, Continued…

14. • Some contractors process a significant amount
of materials and/or subcontracts on behalf of
the government.
• Those costs are typically burdened with
G&A.
Strategy, Continued…
Material & Subcontract Handling (M&SH)

15. Material & Subcontract Handling (M&SH), Continued…
• G&A rates can get out of control (>~25%) and clients will question the
value of the “management and administrative fee”.
• Contractor then moves all costs of administering materials and
subcontracts to a separate pool allocated over the direct
materials and subcontractors.
• The costs are usually nominal in comparison to significant
material and subcontract costs resulting in a lower rate.This rate
is used only for materials and subcontract.
• The results in a value-added G&A rate (vsTotal Cost Input) since
you’ve now separated some of the overhead and G&A costs (pool) and
segregated the direct costs (base).
Important Note: Contractors can always negotiate a M&SH fee that is less
that is less than their G&A without creating a separate M&SH pool.
pool.
Strategy, Continued…

16. Poll Question
Which is a way to create multiple indirect
rates?
Split/multiple overhead pools.
Split/multiple fringe pools.
Create intermediate cost pools.
Create a material & subcontract handling (M&SH) pool.
A
B
C
D
All the above.
E

17. Live Demonstration

18. Sample Rates
Cont…

19. Sample Rates, Continued…

20. Poll Question
How much help do you need with your indirect
rate strategy?
I think I have it, but would like someone to review it.
None, I’ve got it.
What is an indirect rate strategy again?
I need someone to do this for me.
A
B
C
D

21. Save the Date! July 20-22, 2021
Join us for up to three days of educational sessions and earn up to 20 CPE credits
during our first annual GovCon Accounting Summit, a virtual learning experience for
government contract accounting professionals. Learn from industry leading accountants,
attorneys, and consultants on a variety of government contract accounting topics and see some
of the latest software tools in action during live demonstrations.
Visit www.GovConAcct.com for details.

22. Let's Connect
Thank You
CEO/President, Government
Contracts & Accounting Expert-
Left Brain Professionals
Robert@LeftBrainPro.com
(614) 556-4415
www.LeftBrainPro.com
Robert Jones,
CPA, CPCM, NCMA Fellow

23. Please take our survey following this webinar
We AppreciateYour Feedback

24. Don’t Forget to Register for Our
Upcoming Webinar
Join Our Community
Service Contract Act Price Adjustment Issues at DHS
Jordan Parkes, Department of Homeland Security
Wednesday, May 26th, 2021
11 AM Pacific / 2 PM Eastern