Inquiry: We’re working on a project where a material handling and subs handling pool has been set up just for FY2009 – in 2008, it was just the normal G&A base method.
Before submitting rates for 2009 where the G&A is quite high, we wanted to find out more about changing this back. One option that someone suggested is that we have material handling pool with a base of materials, and then also include materials in the base for G&A – same with subs handling and subs.
I have seen it before where someone uses MH and SH and then on top of that charges G&A but I’m not sure it that is truly an option. Can you provide some guidance on this for us?
Response: This is getting into the “psychology” of pricing that becomes more from experience than “law”. The initial short answer, “It is Okay”. The full answer, “read on”:
If the base for G&A is TCI then yes, even if someone has a separate M/H-SC/H pool/base/rate, they can include all of the costs in the G&A Base. Now the G&A Pool will exclude the M/H-SC/H related costs, so the G&A rate is typically lower than it would be.
If the base for G&A is Value Added, then no I would not add G&A to M/H-SC/H. Why? Because the M/H-SC/H costs are excluded from the G&A base, as well as the G&A pool. In this case the G&A rate is typically higher.
The Decision: Is it a wise decision to submit a proposal that shows Materials and Subcontracts with both a “Handling” and “G&A” rate applied? I say “It Depends”. I would not want to do this if I know it could create more issues during negotiations, or if the CO or Prime typically has an issue with this, or they just don’t understand that this is not double-counting. It is not double-counting you know! You would just have to explain/show how it is not.
It’s a numbers game, mixed with tact and negotiating skills. It may be okay but not expedient! Include it in the G&A Base and Charge a Lower G&A Base to it. Exclude it from the G&A Base and don’t charge a G&A rate to it. All other costs will have a Higher G&A charged to them.
As you know, you must be consistent! If you want to change your policy, then stick with it for awhile. You will have to notify the government (DCAA and any Agency that currently has Cost-Type contracts) of your intention to change. Then a cost-impact must be developed by you.
Further support of my response above is that in one of the DCAA examples, they specifically include Materials and Material Handling in their G&A Base and thereby apply G&A to Materials and Material Handling. Not only that, they also apply FEE/Profit to all of the above.
As usual, there is typically no “Quick Question with a Quick Answer”.