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Government Contractors' Newsletter |
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For the serious small government contractor |
July 2011 | |
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COST & PRICING DVD
COMPASS (most popular), NAVIGATOR, or GUIDE Pack
(as low as only $395.00)
Ideal Ongoing Reference Tools
Recorded Live
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 Greetings,
TIME TO REVIEW YOUR COSTS & RATES!
Now that 7 months of the normal calendar year for most firms, 9 months for those with a September fiscal year end date, I encourage you to review your Indirect Rates and budget versus actuals.
It is important to know how your actual rates are comparing to your provisional/billing, or projected rates. This is a good time because enough time has passed to get a reasonable estimate of what your year end rates and costs will be.
How? Take your actual Y-T-D costs and compare them to your budget/projected Y-T-D costs. Any significant variances/differences, either higher or lower, should be looked at closely and explained.
Next: Based on your Y-T-D actuals, project out to the end of your year. Then compare to your budget/projections for the current year. You may find that any significant variances will dissipate due to changes or other factors.
Some of you have accounting vertical software that will do this for you, so go ahead and find the report that will allow you to adjust your budget/projections for the remaining months. Then have your system calculate your Actual Y-T-D Indirect Rates, AND your revised End of Year Indirect Rates.
If you do not have vertical software that does this for you then use your excel spreadsheet capability. Simply export your actual data from your Income and Expense Report to Excel and then calculate your Actual and Projected Rates.
Trust me on this, you will be glad you perform this oversight/monitoring function, even if it only provides confirmation that your Actual Costs and Rates are running reasonably close to your Projections.
If you are uncomfortable with this ask someone to assist in developing an excel spreadsheet for you.
By the way, monitoring your costs and rates periodically is a positive action that should provide additional comfort level to auditors, prime contractors, and customers. Not to mention SBA if you are under one of their certification programs.
In my opinion, due to the potential large fluctuations at the beginning of a year, a detailed review at 6 or 7 months, and then about 9 or 10 months is considered adequate, unless extraordinary situations arise that would require a different schedule.
Have a productive and blessed day as I keep you in prayer.
Enjoy this issue Paul Sr.
You can send comments/suggestions directly to me at paulgunn@paulgunn.com |
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Precontract Costs FAR 31.205-32
INQUIRY:
Are the costs incurred before the effective date of the contract allowable and therefore chargeable to the contract?
RESPONSE:
The answer appears simple enough. Lets start by defining what the types of costs you asked about are. They are called Precontract Costs. FAR 31.205-32 defines precontract costs as costs incurred before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award.
But the key point is what is identified next in the clause: "When such incurrence of the cost is necessary to comply with the proposed contract delivery schedule". These cost Are Allowable to the extent...
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Pricing by CLIN/Task/Delivery
INQUIRY: Dear Paul, the SBA office and I were discussing a proposal I'm working and it was suggested I email you with the problem I'm having. The problem is how to price because I'm not sure how to apply my indirect costs?
The contract is subdivided into more than one Lot and CLIN. In addition, some of the CLINs are performance based and some are requirements based. The CO stated they plan to award the work to 1 or up to 3 contractors. Not knowing which pieces of work we may win can dramatically impact our indirect costs.
Someone suggested we Price each CLIN separately like it is the only piece of work?
I emailed the CO with my concerns and her reply basically just directs us back to the statement of work (SOW). So what would you suggest?
RESPONSE: Your concerns are valid. Things don't always seem as simple when the soup gets stirred. That is when sound judgment and experience is required to minimize risk because after all, you have to do something, right? I would look at the results of pricing both ways.
First, I would price on a CLIN by CLIN basis and see how high or low the prices are. If applicable, I would include in my projection any existing and anticipated highly probable work in the estimates when determining the Indirect Rates and Costs. Then, the impact of each CLIN would be added to the Indirect Pool(s) and Indirect Base(s) as applicable. Until this is reviewed, we don't know what the prices would be and if they are competitive or not.
Alternately, I would.....
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Setting up allocation spreadsheets (efficiently and least costly)
Inquiry: I would like to go through the process of reviewing our numbers and setting up the allocation spreadsheets so that I am confident regarding our percentages (Fringe, OH, G&A, etc). What do you propose is the most efficient & least costly method to accomplish this? Thank you. Senior Engineer
Response: It is good to see another engineer seeking to understand the cost and pricing side of the business. First, you can develop your own spreadsheets in excel to match the ones included in the workbook exercise solution materials that you received at the workshop (also available on our website). Then input your numbers and use the reconciling figure on the G&A schedule to tie into the financial statement on the first page. Some have done this, but most people who are looking to get a quick and accurate look at results will try the second option as follows:
Secondly, to save time and money, you can download the e-file of the exercise solution as a template. It is very inexpensive and is available at a discount to registered community members (follow this link for product tool called "Full Indirect Rate Solution"). The low price is really to recoup some of the administrative costs to develop the spreadsheet and on-site carrying costs.
With the electronic spreadsheet, many people have went in and replaced the numbers on the Income & Expense Report (Page 1) for the current year-to-date period, with their own numbers (placing their expenses in accounts as close to the ones listed as possible or even change the descriptions to match theirs and then putting zeros in those that do not apply......
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What are Misbeliefs? 
I have a book to recommend to everyone. I read it and I learned additional tools that help to improve my internal thought process, even at my age. You see, I am ever seeking to learn how to live a more Godly life and most importantly to learn Gods Truth. Below is a brief excerpt from the book (copyright limits) for your review.
The word misbelief is an important word. In fact, it's the most appropriate label we can think of for some of the ridiculous things we tell ourselves. The amount of suffering we experience due to sustained bouts of negative thinking and battered emotions is outrageous.
Misbeliefs are the direct cause of emotional turmoil, maladaptive behavior and most so-called "mental illness." Misbeliefs are the cause of the destructive behavior people persist in engaging in even when they are fully aware that it is harmful to them (such as overeating, smoking, lying, drunkenness, stealing or adultery).
Misbeliefs generally appear as truth to the person repeating them to him/herself. Words like, "Oh, I can't do anything right. I'm always making mistakes" are good examples. You'll believe these lies when you've just made a mistake. "Oh, I can't do anything right" is a misbelief statement. If you believe words like that, You Are Believing A LIE.
Negative and distorted statements which a person repeats to her/himself come from the devil. These distorted statements are toxic to your sanity, health, and happiness.
You are the controller of your happiness and your unhappiness. You can be free from ugly feelings and turn misbeliefs into truth that will set you free......
The book is titled: Telling Yourself The TRUTH by William Backus & Marie Chapian. I noticed it is available on many websites, including Amazon.com. It is an easy read, especially for someone like me (smile). I believe it will have a good impact for your life, if you take it to heart.
I can think of nothing more I would rather do than share with you that which can assist you in finding peace within and truth.
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