Fee Applied to G&A?

Inquiry:  We have always operated on the premise (i.e., verbal instruction from DCAA) that under a cost-type contract that we cannot charge a fee on our G&A costs. Is this correct? It seems that in the "Application of Indirect Rates to Bases" that I downloaded from your website that a fee was applied to G&A in addition to Direct Labor and to Overhead.

Response: Fee is an allowable, negotiated item. The contracting officer determines the fee rate. The DCAA reviews Cost, although they can point out concerns of fee.

First, or in the future, I would request of the auditor the FAR or other reference that the auditor was quoting from.

Typically, fee is not accepted on subcontracts, travel, and sometimes materials or ODC's (Other Direct Costs). This typically applies to T&M type contracts.

In my experience, fee is applied to all costs, except those that are specifically excluded in the solicitation or by statement of CO. I would always ask, during any Q&A opportunity or via email/phone, to clarify the base the CO will allow fee to be applied to.

As far as the DCAA, if you look at their own model in their Contractors Manual, it shows Fee being applied to "All Cost".

Fee can be charged to G&A. The auditor may have meant that they do not like fee being applied to any G&A that is added to subcontracts, travel, or material. For example, if the contract states no fee is allowed on travel, yet you can add G&A to travel, then fee may not be allowed on the G&A of that travel. But that is getting complicated and should be clarified through Q&A.

In my opinion, fee should be allowed on the G&A of travel in this case. Why? because depending on how one contractor, versus another, develops/indentifies their costs to indirect or direct pools, there can be inconsistencies in who is getting fee on the particular travel cost.

Again, fee is a negotiable item and I would not exclude it from any item without a specific reference to substantiate the exclusion or for competitive reasons.

In most cases, based on experience, I would not request fee on materials, subcontracts, or travel. This is to minimize questions. But even this decision on my part varies from effort to effort. "It's Generally Negotiable"!