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.

Facilities Capital Cost of Money (FCCM)

Cost Accounting Standards 414 and 417 allow contractors to recover facilities capital cost of money under their Government contracts. These CAS Standards have been incorporated into FAR 31.205-10 so as to apply to all contractors, regardless of their level of CAS coverage. Contractors with investments in property, plant, and equipment should not overlook these imputed costs. In order to claim these costs, FCCM must have been included in the initial pricing proposal. We have seen cases where contractors failed to propose FCCM and were later precluded from billing them becasue they were not initially proposed. The computation of the FCCM rate(s) is not complex but is beyond the scope of this post. The FCCM rate changes every six months, January 1st and July 1st. The current rate (as well as historical rates) can be found on the Treasury's website. Note that this site does not refer to Facilities Capital Cost of Money but rather to Prompt Payment Act Interest Rates. The FCCM rates are the same as the Prompt Payment Act rates. CAS and FAR require that the interest rate be based on the rates determined by the Secretary of the Treasury, pursuant to Public Law 92-41 (Prompt Payment Act).

For your convenience, we have included a permanent link to the FCCM rates on our resources page.