CAS 414 recognizes that the cost of facilities capital is a contract cost and provides criteria for measuring and allocating an appropriate share of the cost of money that can be identified with the facilities employed in a business.
CAS 414 contains some very specific techniques that must be used to compute cost of money in connection with price proposals, forward pricing rate agreements, and with the establishment of final indirect cost rates. Cost of money is an imputed cost which is identified with the total facilities capital associated with each indirect cost pool. Generally, cost of money is allocated to contracts over the same base used to allocate the other expenses included in the pool.
The calculation of the cost of money for each contract involves several steps.
- The average net book value of facilities for each indirect expense pool having a significant allocation of facilities is identified from accounting data used for contract costing.
- The cost of money devoted to facilities capital for each indirect expense pool is the product of these net book values multiplied by the cost of money rates per the Secretary of the Treasury under Public Law 92-41, 85 Statute 97. The current rate is 2.625% and is updated every six months. You can always find the current rate here.
- 3) Facilities capital cost of money factors are computed by dividing the cost of money for each pool by the corresponding allocation base. The allocation bases used in this computation must be compatible with the bases used for applying indirect costs in determining contract costs.
The facilities capital cost of money factors, wherever applicable, must be computed in accordance with the CASB-CMF form, Facilities Capital Cost of Money Factors and Computation. The CASB-CMF form and instructions are easily found through an Internet search. For example, here's one from a DOE website.
For contracts covered by FAR but not CAS, the recovery of Cost of Money is usually conditional upon having been specifically identified and proposed in the price proposal. However, even when the contractor waives Cost of Money by failing to propose it, Cost of Money is still considered in computing the normal cost of ownership for purposes of determining the amount of allowable rental cost in a related-party lease under the rental cost principle (FAR 31.205-36). See Appeal of Engineering Inc., NASA BCA No. 187-2.
Some solicitations, such as SBIRs (Small Business Innovative Research) and cost sharing agreements specifically prohibit contractors from claiming cost of money as a contract cost.