Friday, October 12, 2012

What You Need to Know to Claim Cost of Money - Part 1

Today we begin a series of posts written by PNWC's David Koeltzow. One of David's specialties is Facilities Capital Cost of Money.

Facilities Capital Cost Of Money (FCCOM) is an additional source of revenue (it’s not part of profit nor is it an out-of-pocket expense) allowed on Government contracts that only cost contractors the administrative effort to document, compute, and propose it.  This blog strives to increase the use of this valuable option by clarifying Government rhetoric and improving your ability to compute FCCOM.  PNWC also offers to compute FCCOM for you at affordable rates.

Businesses with Government contracts often erroneously and unwittingly (i) include unallowable costs, and (ii) exclude allowable costs.  However, the most frequently allowable costs that we see businesses exclude knowingly is FCCOM.  Why?  The FCCOM regulations are difficult to understand and sometimes not worth the trouble.  This blog’s intention is to help you identify how much FCCOM is worth to you, decrease your efforts/costs to use FCCOM, and increase your revenues from Government contracts by allowing you to include FCCOM in support of your proposed and claimed costs.

Pacific Northwest Consultants (PNWC) is proficient in understanding and computing FCCOM and offers to develop and provide you with a detailed template that computes your FCCOM.  You may be able to use this customized template with minimal adjustment for multiple proposals and even multiple years.  Pricing for small contractors with simple scenarios begins at $150. Call us for a quick cost estimate for your situation 

What is FCCOM? FCCOM is the obscure replacement for interest that the Government agreed to allow following the uproar over the Government’s disallowance of all interest per Federal Acquisition Regulation (FAR) 31.205-20.  “Interest” was disallowed partly because it includes a factor for how risky a business is; certainly, tax payers should not provide extra funds to support a high risk business over a low risk business.  “Capital Cost of Money” is based on the Treasury rates and applies uniformly to all businesses.  “Facilities” covers the land, buildings, and equipment that you use for your regular business activity; this includes tangible (you can touch it) and intangible (i.e., software).  FCCOM is not applicable for idle facilities or land held for speculation.  Like depreciation, FCCOM is not chargeable for assets being developed or constructed until it’s placed into use.  Although it is easiest for most to think of FCCOM as being similar to interest, the Government doesn’t like that comparison.  In fact, claiming FCCOM is not contingent on you having any interest costs.  FCCOM became effective in 1976 via Cost Accounting Standards (CAS) 414 and the later 417 (for assets under construction).  Conformance to CAS is generally required for only very large Government contractors.  However, FCCOM is allowable to all Government contractors via FAR 31.205-10.  Peculiarly, FCCOM is not a cost on your books and payments for FCCOM simply increases your revenue.

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