Disallowance of G&A

The proper G&A allocation base is the one that best represents the activity of the business unit being managed, not the one that avoids government scrutiny.

Everything is negotiable.

The clause at FAR 52.212-4 with its Alternate I allows for payment of a fixed dollar amount for indirect costs on top of "Other Costs" on T&M contracts for commercial items.  The contractor should ensure that the fill-in for that clause is satisfactory before agreeing to the contract.  If the contractor agrees to a fill-in of $0, or agrees to leave the fill-in blank (which effectively represents $0), then $0 is the amount the contractor bargained for.

Once the parties have come to agreement and the contract is awarded, then the contracting officer should fairly administer it.  Fairly administering the contract means providing whatever payment the contractor bargained for.  If the contractor bargained for $0, then $0 is the right amount to pay.  Right?

ji20874 said:

Everything is negotiable.

The clause at FAR 52.212-4 with its Alternate I allows for payment of a fixed dollar amount for indirect costs on top of "Other Costs" on T&M contracts for commercial items.  The contractor should ensure that the fill-in for that clause is satisfactory before agreeing to the contract.  If the contractor agrees to a fill-in of $0, or agrees to leave the fill-in blank (which effectively represents $0), then $0 is the amount the contractor bargained for.

Once the parties have come to agreement and the contract is awarded, then the contracting officer should fairly administer it.  Fairly administering the contract means providing whatever payment the contractor bargained for.  If the contractor bargained for $0, then $0 is the right amount to pay.  Right?

Thank you for the accurate depiction of FAR 52.212-4 Alt I.  Small contractors are not in a position to bargain for anything but $0, so the widespread bulldozing of this trend continues.  I appreciate your taking the time to respond, but the abuse of small contractors continues with no apparent remedy.

If I were in a similar position as a contractor and dealing with a CO like that, I would prepare a professional response along the lines ji20874 posted.  Most COs would back off after seeing/hearing a logical, legal, and proper position.

If you agree to a $-0-or reduced amount for indirect costs using Alt 1, you are still required to follow your disclosed or established accounting practices for allocation of indirect costs.  You cannot reallocate that cost to other contracts without this restriction.  So  in effect are voluntarily foregoing recovery of allocable, allowable and otherwise reasonable costs.

govtacct02 said:

If you agree to a $-0-or reduced amount for indirect costs using Alt 1, you are still required to follow your disclosed or established accounting practices for allocation of indirect costs.  You cannot reallocate that cost to other contracts without this restriction.  So  in effect are voluntarily foregoing recovery of allocable, allowable and otherwise reasonable costs.

Yes, you are effectively agreeing to a margin reduction on that contract equal to the forgone G&A expense.

govtacct02 said:

If you agree to a $-0-or reduced amount for indirect costs using Alt 1, you are still required to follow your disclosed or established accounting practices for allocation of indirect costs.  You cannot reallocate that cost to other contracts without this restriction.  So  in effect are voluntarily foregoing recovery of allocable, allowable and otherwise reasonable costs.

Yes, but one of the things given to me in the way of advice is to change the disclosure such that travel is reduced from the G&A Base.  A small contractor is not going to be prevented from changing the disclosure as they are not subject to CAS.  If they are not going to get G&A on travel anyway, then why leave it in the base and have the allocated amount just go over the cliff and not be recovered? 

The FAR Clause with the Alt I is written for T&M contracts but govt agencies have gone so ga-ga over this that they just won't allow G&A on anything anymore under any circumstances.  I'm wondering if COs and CORs are getting told from above to not allow it.

Corduroy Frog said:

The FAR Clause with the Alt I is written for T&M contracts but govt agencies have gone so ga-ga over this that they just won't allow G&A on anything anymore under any circumstances.  I'm wondering if COs and CORs are getting told from above to not allow it.

What agencies/offices are doing this?  I get to deal with lots all over the government and don’t hear of this issue.

Corduroy Frog said:

Yes, but one of the things given to me in the way of advice is to change the disclosure such that travel is reduced from the G&A Base.  A small contractor is not going to be prevented from changing the disclosure as they are not subject to CAS.  If they are not going to get G&A on travel anyway, then why leave it in the base and have the allocated amount just go over the cliff and not be recovered?

You answered your own question in your original post, where you said

On 11/10/2020 at 10:02 AM, Corduroy Frog said:

The best defense is to remove Travel, etc. from the G&A base when applying for a provisional rate, thus raising the rate applied to Labor (perhaps the last bastion to survive the G&A onslaught).  This can recover some lost application of G&A, but small contractors usually place a ceiling on G&A when bidding in order to be competitive.  So the $$$ is not really recovered.

I have nothing further to add to the conversation. Good luck!