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Negotiating Final Indirect Rates

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Negotiating Final Indirect Rates

PVBS was joined by Bill Walter, Director of Dixon Hughes Goodman’s (DHG) Government Contract Advisory Practice, as government contractors are in full swing to submit their final indirect rates known as Incurred Cost Submissions (ICS). For government contractors, an indirect cost rate is a device for equitably allocating indirect costs to projects. Whether indirect costs are part of benefits, overhead or G&A costs, executives should know advantages and disadvantages in pooling one, two or all three together.

Going over the history of indirect rates for government contractors, Bill explored the various options to determine the value of indirect rates and settlements available to government contractors. These included issuing unilateral final indirect rates, expanded guidance regarding cost allowability matters, establishing final indirect rates when a contractor’s records have been lost or destroyed or if the contractor is out of business.

A quick closeout, one of the options mentioned in the webinar, is a process used to settle indirect costs for a specific contract or group of contracts, in advance of the determination of final indirect cost rates. As long as the contract is physically complete and the amount does not exceed one million dollars, contractors can integrate unsettled indirect costs to be allocated to one or more contracts in a single fiscal year, not to exceed 15% of the estimated total unsettled indirect costs allocable to cost-type contracts for that fiscal year.

With the DCAA making progress on their backlog, it’s more likely a matter of time before a contractor finds his company in an audit. Mr. Walter left some advice to help government contractors with their final indirect rate submissions. First, he suggests companies be prepared and timely with their submissions and establish a project plan for ICS preparation. Secondly, ensure that your accounting system can segregate direct costs from indirect costs and direct costs by contract/task, like the Microsoft Dynamics solutions for Government Contractors from PVBS.

To learn more, download the full webinar below.

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