Obtaining Indirect Cost Proposals

Contractors with flexibly priced contracts (e.g. CPFF, CPIF, T&M, etc) are required by FAR 52.216-7 to submit annual incurred cost proposals within six months of the close of their fiscal years. Contracting officers may grant extensions for "exceptional circumstances" but has historically been reluctant to grant extensions. Although its the contracting officer who has the responsibility to obtain these annual submissions, DCAA (Defense Contract Audit Agency) has taken the lead in obtaining them and in determining whether the proposals are adequate.

The process goes something like this:

1. Three months after the end of the contractor's fiscal year, the auditor will remind the contractor of its contractual responsibility to submit an indirect cost rate proposal.
2. When a contractor submission is 30 days overdue (i.e. seven months after the fiscal year end) the auditor will notify the contractor that its submission is past due.
3. When a contractor submission is three months overdue (i.e. nine months after the fiscal year end), the auditor will request the contracting officers assistance in obtaining the submission.
4. When a contractor submission is five months overdue, the auditor will notify the contractor that its submission is past due and advise the contractor that it will unilaterally establish indirect rates.
5. When a contractor submission is six months or more overdue, the auditor will recommend the contracting officer unilaterally establish indirect cost rates. The auditor will provide the contracting officer its recommendation on what those rates should be.

Tomorrow, we will discuss how the auditor (namely DCAA) develops "unilateral" rates.