The evolutional growth of a government contractor and some grantees includes a steady avalanche of regulatory hurdles along with their companion acronyms. One such acronym is the PBR – Provisional Billing Rate – a critical step for those having cost-reimbursable and Time and Material type contracts. In the grant universe, these may have different names and levels of formality, such as the ICR – Indirect Cost Rate Submission (NIH, NSF) or simply “send us your indirect rates” (DOE).
And while PBR isn’t something you drink, as one client informed me, you may reward yourself with one once you successfully navigate the process.
In the contracting world, the PBR proposal kicks off the process described in FAR 52.216-7 and 42.704 where a “billing rate” is established for a company’s fiscal period. This billing rate consists of all indirect rates used for reimbursement on cost type contracts and Time and Material contracts, where a material handling and/or material G&A rate exists.
It’s fair to say this annual setting of indirect billing rates provides a measure of convenience for both the government and the contractor. Otherwise, the contractor would have to calculate indirect rates each month and adjust year-to-date billing totals. Instead, contractors must “monitor” their actual indirect rate performance and take action if predicted actual rate performance “substantially” diverges with established billing rates.
The PBR is often confused with the ICP/ICE process.
ICP – Incurred Cost Proposal. ICE – Incurred Cost Estimate. Both these have the same meaning, which is an annual report required by FAR 52.216-7 that looks back upon a previous fiscal year, measuring the variance between billed costs (including indirect rates) and actual costs for cost type contracts.
Ideally, contractors submit PBRs every year prior to their first billing cycle of the new fiscal period. PBRs are submitted to the local DCAA office with a copy going to the DCMA (ACO)*. The FAR* clauses also allows contractors to continue billing into a new fiscal year using previously approved billing rates.
Many contractors may be receiving letters from the DCAA asking for the submittal of their 2022 PBR. Again, this is not to be confused with the ICP/ICE submission which aren’t due until six months after the fiscal year (typically June 30).
If contacted by the DCAA, contractors have the choice of billing at their current rate or proposing new billing rates. Proposing new billing rates may require a delivery to DCAA of a provisional company budget along with the prior year indirect rate calculations. Even if you choose to keep the existing billing rates, the DCAA may still want a comparison to the prior year rates.
DCAA auditors have wide review authority. It’s common for auditors to look back several years examining not only prior PBR proposals but ICP/ICE submissions, as well. Questions may arise as to cost allowability, indirect rate structure changes, and observations surrounding trend analysis.
Good news – you landed your first and only cost-plus type contract. You’ve negotiated your indirect rates with the government procuring office. You send in your first invoice, it gets rejected by DCAA, and the procurement system grinds to a halt.
The DCAA is saying you must have provisional billing rates approved by them before invoicing. You say you calculated your indirect rates and already had them approved by the government during negotiations.
The solution: submit the identical indirect rate proposal to the DCAA that you submitted to the procuring office. The DCAA typically understands the urgency and can review the proposal quickly, getting you back on track for billing.
Grant organizations follow similar processes which vary according to the agency and their section of the *CFR’s. If the DoD is your primary agency, the grant agencies will typically accept your PBR rates, although some may have additional cost restrictions.
*Acronyms
DCAA – Defense Contract Audit Agency (Contacts may or may not be in your contract)
DCMA (ACO) – Defense Contract Management Agency – where your Administrative Contracting Officer lives – see your contract page 1.
FAR – Federal Acquisition Regulations(https://www.acquisition.gov/browse/index/far)
CFR – Code of Federal Regulations(http://www.ecfr.gov)