DoD T&M Subcontractors at Cost

I have been told that a prime can only recover subcontractors under DoD T&M contracts at cost. Is this correct? Would this mean that subcontractors are essentially ODCs and billed under the "M"?

You've been told wrong. Read FAR 16.601, particularly 16.601( c).

Thanks. Is there any requirement for subcontractors to have their own labor categories apart from prime labor categories?

I have been told that a prime can only recover subcontractors under DoD T&M contracts at cost. Is this correct? Would this mean that subcontractors are essentially ODCs and billed under the "M"?

I think you may be thinking about FAR 52.216-29 as modified by DFARS 252.216-7002. This has to do with how labor is proposed for T&M contracts for non-commercial items when adequate price copetition is contemplated.

I have been told that a prime can only recover subcontractors under DoD T&M contracts at cost. Is this correct? Would this mean that subcontractors are essentially ODCs and billed under the "M"?

I assume that you are asking about the non-commercial items T&M payment clause, FAR 52.232-7 (FEB 2007). If so, "subcontractor" refers to two kinds of entities. First, there is the subcontractor who is going to provide labor under paragraph (a). Second, there is the subcontractor who is going to provide "supplies and incidental services for which there is no labor category" under subparagraph ((ii)(. The contractor is paid at the specified hourly rates for the first category of subcontractor. The contractor is reimbursed at cost for the second category.

Thanks.

What is the purpose of the FAR specifying that fixed hourly rates include wages, overhead, general and administrative expenses, and profit? Is the purpose to highlight that profit is not included in certain situations (cost elements used to establish the rate) or is the purpose just to highlight that these cost elements are not separately priced (NSP) under the contract?

I found this recent case:

http://www.cbca.gsa.gov/2007app/BORWICK_01..._SERCO,_INC.pdf