Eric:

Why do think that G&A rate ceilings complicate life under a cost-reimbursement contract? The Government audits the contractor, as usual, and then reimburses it on the basis of the lesser of the actual rate or the ceiling rate. If the actual exceeds the ceiling, then the contractor simply accounts for the excess as an expressly unallowable cost in accordance with FAR 31.201-6.

Also, I don't know what you mean by the "hybrid" and "neither fish nor fowl" comments. A hybrid between what and what? What's the fish and what's the fowl?

A G&A rate ceiling is simply a limitation on cost allowability, and not an especially complicated one. In Maureen's case, G&A costs in excess of the ceiling would be expressly unallowable based on a terms of the contract. That term (the ceiling) would constitute an advance agreement negotiated in accordance with FAR 31.109. FAR 31.109(h)(13) expressly identifies advance agreements on G&A costs as being "particularly important" on some kinds of contracts. FAR 31.205 includes many allowability limitations that are far more difficult to understand and apply. If a limitation on cost allowability makes a cost-reimbursement contract some kind of hybrid, then all cost-reimbursement contracts are hybrids.

I'm not saying that Maureen's plan to negotiate G&A rate ceilings is necessarily a good idea in this specific case; I just don't understand your "hybrid" and "neither fish nor fowl" comments. Are you saying that the parties to a cost-reimbursement contract should never agree to limit the allowability of specified costs? Can you tell us about specific practical difficulties associated with G&A rate ceilings of which we may not be aware?

By Eric Ottinger on Thursday, June 29, 2000 - 12:41 pm:

Maureen,

Why do you want to cap G&A, but not cap other indirects like overhead?

If the offeror has a good record of meeting cost goals and controlling indirect costs, why do you need or want a cap?

Generally, I would use caps when the offeror is intentionally understating the indirect costs to get a competitive advantage, or the offeror is in a very volatile situation.

Otherwise I don't see the point. Caps create a hybrid contract type that is neither fish nor fowl, and they complicate life all around.

Eric

By Vern Edwards on Thursday, June 29, 2000 - 12:38 pm:

Maureen:

Based on GAO protest decisions about cost realism evaluations and the use of ceilings on indirect cost rates, I would state in the RFP that you will evaluate offerors' estimated costs based on their proposed ceiling G&A rate. I would state further that since the Government will not be obligated to reimburse the contractor at a rate in excess of the G&A ceiling, the Government will not make adjustments to proposed ceiling G&A rates when assessing the realism of proposed estimated costs.

The GAO has long approved of this approach. I hope that this isn't too "lofty." (Smile)

Vern

By Maureen Huston on Thursday, June 29, 2000 - 11:24 am:

We have a requirement for a cost contract that allows the offerors to propose their normal indirect rates, plus requests a ceiling rate on G&A. Estimated value of acquisition is $30M. Competition is expected. How would the ceiling rate be evaluated and what would suggested solicitation language be?

Thanks for the help!