Limits on A&E Overhead Rates - Are there any?
I am contacting you at the recommendation of our local SBA district regarding a questions I have on calculating the overhead rate for an IDIQ contract. I am completing the rate schedule worksheet which includes the standard hourly rate plus overhead and profit to arrive at the billing rate per hour.
I would like to confirm if there are any A/E rates that are standardized which I should be aware of. I have been proceeding with an overhead rate based on my business operations and bookkeeping and I have heard from one engineer that the Federal Government may have a limit on the overhead rate.
RESPONSE: The following are two responses to a similar question posed by government purchasing staff to the DOT FTA (Federal Transit Authority). The responses confirm information taught on our DVD and at our Group Live workshops.
Inquiry: Does FTA have a set or an approved overhead rate for A&E Contracts?
Response 1: FTA does not have a set or approved rate for contracts with A&E firms or any other firms. You will need to evaluate the specific firm's current and projected overhead rate, with the help of an auditor who is familiar with indirect cost pools and the cost principles for third-party contracts financed with Federal funds. Each negotiation of overhead rates will reflect that specific company's situation and the rate negotiated will be different than that of other companies.
One reason for differences among companies is that they will treat their costs differently as between direct and indirect costs (overhead). For example, one A&E firm will charge CAD costs directly to contracts while another will charge CAD as an overhead cost. This difference in cost treatments can produce significantly different rates, so that a single rate for all firms would be impossible.
Similarly, companies with a large current volume of work may be experiencing a low overhead rate, while another with lower current sales will have a higher rate because the fixed costs in the overhead pool must be recovered over a lower sales or direct labor base.
Response 2: You can impose an overhead rate cap on non-A&E consulting agreements, such as services for auditing, medical, legal, contract administration and technical work of any kind except those for A&E work.
You cannot impose overhead caps on contracts for A&E work, which is defined in 49 U.S.C. § 5325(d).
Please note that a specific agency may have their own supplemental restrictions, so review the solicitation carefully and please ask the question to the CO or their COTR if you are still unsure.
I hope this helps!