DCAA Compliance Blog

The answer to this question depends on your perspective as either a government acquisition/grant professional or a government contractor or grantee. Negotiating or directing capped indirect rates on cost reimbursable contracts and in the grant environment may at first appear to be an effective risk mitigation tool for buyers and grant managers. On the other hand, a case can be made that the use of this technique may not necessarily produce the intended results. To be sure, there are plenty of opportunities to reduce a buyer’s risk without resorting to what could be considered “piling on.”

At ReliAscent, we routinely see contractors and grantees that have submitted indirect rates that don’t adequately reflect their operations, don’t align with their accounting systems, and frustrate their billing processes. We find many factors contribute to this chaos, but one that consistently comes up is the confusion surrounding government or prime contractor-supplied bid instructions, math models, and on-line bid templates.

Indirect Rates, Huh? What are They Good For?

With apologies to the 1970’s Motown hit, one of the most common questions we get at ReliAscent® surrounds development and utility of indirect cost rates. Indirect costs are those that cannot easily be allocated discretely to a single project or across a number of projects. An indirect rate describes a mathematical ratio and its logical relation of indirect costs (the numerator) divided by the “base” (the denominator). In this manner, one or more “pools” of indirect costs can be allocated mathematically to all projects.

The DOE has just released its next round of topics for the FY2019 SBIR Phase I solicitation. Grant limits are a bit higher at $200,000 along with an increase of Commercial Assistance allowance to $6,500. See https://science.energy.gov/sbir/funding-opportunities/

The bulk of what the DoD buys in the research and development (R&D) realm complies with customary processes surrounding competition, cost and pricing, and reams of regulations covering everything from labor rights to intellectual property. The Small Business Innovation Research (SBIR) is the prominent avenue for small businesses to tap into DoD R&D funding.

Since 1990, the NIH, through annual funding from Congress, and more recently continuing resolutions, sets salary limitations for individuals having NIH grants, cooperative agreements, and contracts. This annual salary limitation is benchmarked at the Executive Level II of the Federal Executive pay scale. The NIH Notice Number NOT-OD-18-137 released March 7, 2018, increases this limit to $189,600, or $91.15/hour.