Index
A
ABC. See activity-based costing
accounting systems. See also record keeping
complexity, 40
cost accounting standards, 39
generally accepted accounting principles, 39
manually maintained, 40
overview, 39
products, 40–41
activity-based costing (ABC), 48
administrative contracting officer (ACO), 201, 204
Aerojet-General Corporation (ASBCA No. 12264), 182
alcoholic beverages, 82
allowable costs
accepted business practices, 60–61
advance agreements, 65–66
contract terms, 65–66
cosmetically low rates, 70–71
cost pools, criteria for establishing, 67–69
costs benefiting several cost objectives, 63–64
costs incurred specifically for contract, 63
costs necessary to overall business operations, 64–65
indirect cost pools, 66–67
ordinary and necessary, 60
overview, 57–59
prudent business person, 61
reasonableness, 59
segregation of unallowable costs, 71–73
significant deviations, 61
American Bosch Arma Corporation (ASBCA No. 10305), 182, 196
American Machine & Foundry Co. (ASBCA No. 15037), 194
Armed Services Procurement Regulation (ASPR), 53
asset valuations resulting from business
combinations, 82
audits
accounting system review, 239–240
auditor approaches, 258
basic record keeping, 240–241
compensation system, 255
contract termination, 270
cost accounting standards, 268–270
DCAA Contract Audit Manual, 272–273
developing cost estimates, 257
direct labor costs, 258
direct labor hours, 259
direct labor rates, 258–259
DOD Estimating System Requirements, 245–248
employee interviews, 252–254
equitable contract price adjustment, 270
estimating system review, 243–244
financial capability, 270–271
incurred cost, 259–260
indirect cost rates, 258–259
indirect costs, 261–263
internal controls, 241–242
labor costs, 260–261
labor recording system, 248–249
limitation of cost clause, 242–243
make-or-buy decisions, 244–245
material management and accounting system, 272
materials, 258–259, 261
operations, 271–272
organizational relationships, 244
other direct costs, 258–259, 263–264
overview, 239
payment requests, 242
postaward review, 264–268
price proposal, 257
procurement system review, 254–255
reasonableness of compensation, 255–256
reports, 254
review requirements, 244
risk assessment, 249–252
subcontracts, 258, 261
uncompensated overtime, 256–257
updating cost or pricing data, 245
written policies and procedures, 241–242
B
B&P. See bid and proposal
B&P/IR&D compliance, 263
backpay, 85
bad debts, 76
basic ordering agreement (BOA), 35–36
BCA. See Board of Contract Appeals
Beech Aircraft Corporation (ASBCA No. 25388), 199
Bell and Howell Co. (ASBCA No. 11999), 186, 194
bid and proposal (B&P), 98, 251
BOA. See basic ordering agreement
Board of Contract Appeals (BCA), 25
C
CAS. See cost accounting standards
CAS Steering Committee and Working Group, 113–115
CASB. See Cost Accounting Standards Board
Chu Associates, Inc. (ASBCA No. 15004), 185
CICA. See Competition in Contracting Act
CLIN. See contract line item number
CO. See contracting officer
commercial items, 1–3
communications, competitive proposals, 9–11
company-furnished automobiles, 84
Competition in Contracting Act (CICA), 1, 175
Composition of Total Costs, 50
consulting costs, 88–90
contingency costs, 99
contract administration
auditor determination procedure, 205
audits, 202–203
Contract Briefing Card, 232–235
contract modifications, 208–209
contract payments, 203
contracting officer determination, 204–205
cost-sharing rates and ceilings on indirect cost rates, 205
disallowing costs after incurrence, 207
duties, 201–202
earned value management systems, 210
ethics, 210
final indirect cost rates, 204
forward-pricing rate agreements, 205–206
government delay of work, 207–208
government property, 209–210
importance of, 201
past performance evaluations, 208
provisional or interim billing rates, 203–204
quick-closeout procedure, 206–207
Schedule A, Summary of Claimed Indirect Cost Rates, 212
Schedule B, General and Administrative Costs Expenses, 213
Schedule C, Overhead Expenses, 214
Schedule D, Fringe Benefit Expenses, 215
Schedule E, Claimed Direct Costs, 215
Schedule F, Facilities Capital Cost of Money Factors Computation, 216
Schedule H, Direct Cost, 217
Schedule H-1, Government Participation in Costs, 218
Schedule I, Schedule of Cumulative Direct and Indirect Costs, 219
Schedule J, Subcontract Information, 220
Schedule K, Summary of Hours and Amounts on T&M/Labor Hour Contracts, 221–229
Schedule L—Reconciliation of Total Payroll to Total labor Distribution, 230
Schedule M-Listing of Decisions/Agreements or Approvals, 231
Schedule N—Certificate of Final Indirect Costs, 231
Schedule O—Schedule of Contract Closing Information, 231
Schedule T—Executive Compensation Data, 237
stop-work orders, 207–208
subcontracting, 209
suspension of work, 207–208
Table of Contents, 211
termination for convenience, 210
contract cost principles, origins of, 53
contract costs, managing, 45–46
contract line item number (CLIN), 7
contract price negotiation, 159–161, 171–173. See also
Department of Defense
contract types
financial reward, 36–38
government selection, 14–15
overview, 13–14
contracting officer (CO), 201
contributions, 76
corporate security prices, 83
cost accounting standards (CAS)
covered contracts, 111–112
exempt contracts, 112
importance of, 36
legislation, 107–108
price adjustments, 110–111
waivers, 112–113
Cost Accounting Standards Board (CASB). See also
Standards
history, 110
importance of, 53, 107
operating policies, 109–110
Public Law 91–379, 108–109
cost allocation, 46, 49
cost reimbursement contracts
cost-plus-award-fee contract, 29–30
cost-plus-fixed-fee, 28
cost-plus-incentive-fee, 28–32
cost-reimbursement-only, 28
cost-sharing, 26–28
overview, 23–26
cost structure, 49–50
cost-plus-award-fee contract (CPAF), 29–30
cost-plus-fixed-fee contract (CPFF), 28
cost-plus-incentive-fee contract (CPIF), 28–32
cost-reimbursement-only contracts, 28
cost-sharing contract, 26–28
CPAF. See cost-plus-award-fee contract
CPFF. See cost-plus-fixed-fee contract
CPIF. See cost-plus-incentive-fee contract
credits, 52, 55–56
Cutler Hammer, Inc. v. U.S., 197–198
D
DAR. See Defense Acquisition Regulation
DCAA. See Defense Contract Audit Agency
DCAA Contract Audit Manual (DCAM), 272–273
DCMA. See Defense Contract Management Agency
Defense Acquisition Regulation (DAR), 53
Defense Contract Audit Agency (DCAA), 12, 39, 49, 202, 264–266
Defense Contract Management Agency (DCMA), 201
Defense Logistics Agency (DLA), 201
deferred compensation, 86
Deltek, 40
Department of Defense (DOD)
contract-type risk and working capital adjustment, 165–168
cost efficiency factor, 171
DD 1861-Contract Facilities Capital Cost of Money, 169
facilities capital employed, 168–170
Factors Computation for Facilities Capital Cost of Money, 170
management risk, 164–165
performance risk, 163
profit objective determination, 161, 163
technical risk, 163–164
Truth in Negotiations Act, 175
weighted guidelines method, 161–162
direct costs, 46–47
disclosure statement
corporate expenses, 138
deferred compensation, 138
depreciation and capitalization practices, 138
direct costs, 137
dollar threshold of contract awards for determining filing requirements, 134–135
exemptions, 136
general information and certification, 136–137
importance, 134
indirect costs, 137–138
insurance, 138
other costs and credits, 138
review and approval, 136
revising, 135–136
discussions, 9–11
DLA. See Defense Logistics Agency
DOD. See Department of Defense
donations, 77
Dynamics NAV, 40
Dynamics SL, 40
E
E-Systems (ASBCA No. 17557), 187
earned value management systems (EVMS), 210
employee morale, 87
employee stock ownership plan, 87
employee stock ownership plan (ESOP), 87
enterprise resource planning (ERP) software, 40
entertainment costs, 77
Environmental Protection Agency (EPA), 202
ERP. See enterprise resource planning software
ESOP. See employee stock ownership plan
estimating process
direct labor costs, 140–142
direct material costs, 142–144
indirect costs, 145–147
make-or-buy decision, 140
other direct costs, 144–145
overview, 140
quantity estimates, 140
evaluation factors, 8–9
evaluation process, competitive proposals, 8–9
EVMS. See earned value management systems
excessive pass-through costs, 82
executive compensation, 83
F
False Claims Act (FCA), 210
FAR. See Federal Acquisition Regulation
FARA. See Federal Acquisition Reform Act
FASA. See Federal Acquisition Streamlining Act
FCA. See False Claims Act
Federal Acquisition Reform Act (FARA), 176
Federal Acquisition Regulation (FAR), 39, 53
Federal Acquisition Streamlining Act (FASA), 1, 176
Federal Procurement Regulation (FPR), 53
Federal Supply Service (FSS), 1
FFP. See firm-fixed-price contracts
financial costs, 77
fines, 77
firm-fixed-price contracts (FFP), 15
firm-fixed-price with successive targets, 20–26
fixed-price award-fee contracts, 23
fixed-price contracts
firm-fixed-price, 15
firm-fixed-price with economic adjustment, 19–20
firm-fixed-price with successive targets, 20–26
fixed-price award-fee, 23
fixed-price incentive, 16–19
fixed-price level-of-effort, 22–23
fixed-price redeterminable, 20
incentives, 18–19
overview, 15
fixed-price incentive contracts (FPI), 16–18
fixed-price level-of-effort (FP-LOE), 22–23
fixed-price redeterminable contracts (FPR), 20
FMC Corporation (ASBCA Nos. 10095 and 11113), 189
forward-pricing rate agreement (FPRA), 187, 205
forward-pricing rate recommendation (FPRR), 206
FP-LOE. See fixed-price level-of-effort
FPI. See fixed-price incentive contracts
FPR. See Federal Procurement Regulation; fixed-price redeterminable contracts
FPRA. See forward-pricing rate agreement
FPRR. See forward-pricing rate recommendation
fringe benefits, 84
FSS. See Federal Supply Service
G
G&A. See general and administrative costs
GAAP. See generally accepted accounting principles
gaming, 256
GAO. See Government Accountability Office
general and administrative (G&A) costs, 30, 48–49
General Services Administration (GSA), 3
generally accepted accounting principles (GAAP), 39, 53, 240
gifts, 88
golden handcuffs, 86
golden parachutes, 86
goodwill, 81–82
Government Accountability Office (GAO), 239
government contracting. See federal contracting
government cost regulations, 53–55
GSA. See General Services Administration
H
human resource costs
backpay, 85
company-furnished automobiles, 84
consulting costs, 88–90
corporate security prices, 83
deferred compensation, 86
employee morale, 87
employee stock ownership plan, 87
executive compensation, 83
fringe benefits, 84
gifts, 88
golden handcuffs, 86
golden parachutes, 86
labor/management agreements, 86
pension plans, 83–84
personal services compensation, 82
post-retirement benefits, 86–87
professional activity costs, 90
professional costs, 88–90
reasonableness of compensation, 85–86
rebates, 84
relocation, 90
retirement, 90
severance pay, 84–85
trade activity costs, 90
training, 91
travel, 84, 91–93
tuition, 84
I
ICE. See indirect cost electronically
ID. See indefinite-delivery contracts
IDIQ. See indefinite-delivery indefinite quantity contracts
IFB. See Invitation for Bids
IG. See Office of the Inspector General
incentives contracts, 18–19
incurred costs, 56–57
indefinite-delivery (ID) contracts
definite-quantity, 33
indefinite-quantity, 34–35
overview, 32–33
requirements contract, 33
indefinite-delivery indefinite-quantity (IDIQ) contracts, 34–35
independent research and development (IR&D), 98, 251
indirect account analyses, 263
indirect adjusting entries, 263
indirect allocation bases, 263
indirect cost electronically (ICE), 204
indirect cost structure development, 51
indirect costs, 46–47
indirect rate computations, 263
inspect-and-repair-as-needed (IRAN) contracts, 31
interest, 77
internal controls, 44–45
Invitation for Bids (IFB), 3
IR&D. See independent research and development
IRAN. See inspect-and-repair-as-needed contracts
J
job order system, 50
L
labor-hour contracts, 32
labor/management agreements, 86
Lambert Engineering Company (ASBCA No. 13338), 188
late proposals, 7
legal and other proceedings costs, 80–81
letter contracts, 35
Libby Welding Corp. (ASBCA No. 15084), 199
limitation of cost clause (LOC), 24–25, 46, 242
lobbying, 77–79
LOC. See limitation of cost clause
losses on other contracts, 79
M
M-R-S Manufacturing Company (ASBCA No. 14825), 191
marketing. See also shaping the RPF
McDonnell Douglas Corporation (ABSCA No. 12786), 192
Microsoft Office, 40
miscellaneous costs
contingencies, 99
economic planning, 100
environmental cleanup, 104–105
government shutdowns, 106
insurance indemnification, 100
material costs, 100–101
other business expenses, 101
patents, 11
precontract, 101
restructuring, 105–106
royalties, 101
termination, 103–104
use of patents, 101–102
mischarging costs, 77
N
National Performance Review (NPR), 175
negotiated contracts
cost or priced, 4–5
evaluation factors, 5
exchanging information, 5–6
oral presentations, 5
overview, 4
sealed bid, compared to, 4–5
special notices, 6
new business-related costs
bid and proposal, 98
independent research and development, 98
selling costs, 98–99
not-to-exceed (NTE) price, 35
NPR. See National Performance Review
O
Office of Management and Budget (OMB)
Circular A-122, 202
Circular A-21, 202
Circular A-76, 7
Office of the Inspector General (IG), 202
Oracle, 40
organization costs, 79
other transactions (OT), 36
overhead costs, 47–48
P
Paceco, Inc. (ASBCA No. 16548), 186
past performance, 8–9
penalties, 77
pension plans, 83–84
personal services compensation, 82
physical resource costs
cost of money, 93
depreciation, 94–95
disposition of depreciable property, 95–96
idle capacity, 96
idle facilities, 96
maintenance and repair, 96
manufacturing and production engineering, 96–97
plant reconversion, 97
rental costs, 97
special test equipment, 97–98
special tooling, 97
PNM. See price negotiation memorandum
political activity, 77–79
post-retirement benefit (PRB), 86–87
presolicitation notices, 6
price negotiation memorandum (PNM), 195, 206
price proposals
direct labor, 157–158
Employee Worksheet, 148
facilities capital cost of money, 158
Fringe Benefit Calculation Worksheet, 149
General and Administrative Calculation Worksheet, 152–154
general instructions, 147, 149, 151, 154–156
indirect costs, 158
materials and services, 156–157
other costs, 158
Overhead Calculation Worksheet, 150–151
royalties, 158
price reasonableness, 9
process cost system, 50, 52
procurement methods, overview, 1
professional activity costs, 90
professional costs, 88–90
profit, 36–37
Prompt Payment Act, 203
public relations and advertising costs, 75–76
R
reasonableness of compensation, 85–86
rebates, 84
record keeping, 41–43. See also accounting systems
relocation, 90
request for information (RFI), 6
request for proposals (RFP)
contractor-initiated, 40
draft, 6
oral, 7
purpose, 7
requirements contracts, 33
retirement, 90
Revenue Act of 1916, 53
RFI. See request for information
RFP. See request for proposals
Rogerson Aircraft Controls (ASBCA No. 27954), 198
S
SAP, 40
sealed bids, 3–4
service centers, 48
severance pay, 84–85
significant subfactors, 8–9
Singer Co., Librascope Division (ASBCA No. 17604), 181
solicitation mailing lists. See bidders’ lists
Standard 401: Consistency in Estimating, 155
Standard 402: Consistency in Allocating Costs Incurred for the Same Purposes, 115–116
Standard 403: Allocation of Home Office Expenses to Segments, 116–117
Standard 404: Capitalization of Tangible Assets, (1) 118
Standard 405: Accounting for Unallowable Costs, (2) 119
Standard 406: Cost Accounting Period, 119
Standard 407: Use of Standard Costs for Direct Material and Direct Labor, 119–120
Standard 408: Accounting for Costs of Compensated Personal Absences, 120–121
Standard 409: Depreciation of Tangible Capital Assets, 121–123
Standard 410: Allocation of Business Unit General and Administrative Expenses to Final Cost Objectives, 123–125
Standard 411: Accounting for Acquisition Costs of Materials, 125–126
Standard 412: Composition and Measurement of Pension Cost, 126–128
Standard 413: Adjustment and Allocation of Pension Cost, 128–130
Standard 414: Cost of Money as an Element of the Cost of Facilities Capital, 130
Standard 415: Accounting for the Cost of Deferred Compensation, 130–131
Standard 416: Accounting for Insurance Costs, (i) 132
Standard 417: Cost of Money as an Element of
the Cost of Capital Assets Under Construction, (ii) 133
Standard 418: Allocation of Direct and Indirect Costs, 133
Standard 420: Accounting for Independent Research and Development and Bid and Proposal Costs, (iii) 134
Sylvania Electric Products, Inc. (ASBCA No. 13622), 190, 192
Sylvania Electric Products, Inc. v. U.S., 182, 196
T
T&M. See time and materials contracts
TD. See Treasury Decision
testing of indirect accounts, 263
three factor formula, 49
time and materials contracts (T&M), 30–32, 251
Time Report-Hourly Employees, 42
Time Report-Salaried Employees, 43
timeliness, 7–8
TINA. See Truth in Negotiations Act
total cost, 55
total cost input method, 48–49
trade activity costs, 90
training, 91
travel, 84, 91–93
Treasury Decision (TD), 53
Truth in Negotiations Act (TINA). See also defective
pricing
adequate price competition, 177
applicability, 175–176
available data, 189–191
certificates, 199
changes in production methods or purchasing volume, 186–187
commercial items, 178
contract reliance on quotes, 185–186
cost and pricing data, 181–183
covered contracts, 176–177
data supporting projections, 187–188
government burden of proof, 181
importance, 11–12, 175
make-or-buy decisions, 189
management decisions affecting costs, 189
nonrecurring costs, 186
postaward review, 264–265
price increase, 196–197
price reductions, 179
prohibitions on obtaining cost or pricing data, 177
reliance, 195–196
requiring information other than cost or pricing data, 178–179
setoffs, 197–199
subcontract considerations, 179–180
subcontract prices negotiated after prime’s price agreement with the government, 186
subcontractor data and prime contractor’s
responsibilities, 183–185
submission of data, 191–195
unit-cost trends, 188–189
vendor/subcontractor quotes, 183
waivers, 178
tuition, 84
U
unallowable costs
alcoholic beverages, 82
asset valuations resulting from business combinations, 82
bad debts, 76
contributions, 76
donations, 77
entertainment costs, 77
excessive pass-through costs, 82
financial costs, 77
fines, 77
goodwill, 81–82
interest, 77
legal and other proceedings costs, 80–81
lobbying, 77–79
losses on other contracts, 79
mischarging costs, 77
organization costs, 79
penalties, 77
political activity, 77–79
public relations and advertising costs, 75–76
unauthorized contract types, 36
Universal Restoration, Inc. v. U.S., 195
W
Whittaker Corporation (ASBCA No. 17267), 193
written policies and procedures, 44–45