Wednesday, December 22, 2010

Profit on Cost of Facilities Capital?

FCCM (Facilities Capital Cost of Money) is allowable under FAR 31.205-10. Essentially, it allows contractors to claim an imputed interest on the capital costs employed when performing Government contracts. To overly simplify the process, the costs are calculated by multiplying net book value of assets (purchase price less depreciation) times the current "treasury rate" and then allocated to contracts (or proposals) over an equitable base - usually the same base used to allocate depreciation costs.

The question arises from time to time whether contractors can apply profit or fee on FCCM. The answer is 'no. FAR 15.404-4(c)(3) instructs contracting officers to exclude any FCCM from any cost objective amount before developing profit/fee positions.

By the way, if you've got assets you're using on your Government contracts and are not claiming FCCM, you're losing out on some allowable costs.


  1. Technically FCCM is an imputed cost. Cost of money was historically considered an element in negotiating fee. I believe the regulatory discussion leading to the allowability of FCCM as an imputed cost actually called for a fee reduction where FCCM is applied as an imputed cost. Many contractors forget or don't know this. Money is not free, nor is FCCM a new concept.

  2. You're right. Thanks for the clarification.