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Preparing a Cost Proposal in the Government Environment

The following blog is an article taken from our recent ReliAscent Quarterly Newsletter (Volume 5, Issue 3), published earlier this month.

In the world of government contract accounting, preparing a cost proposal can get complicated.  Each agency has a different set of rules, and even within a single agency, like DoD, the rules vary from branch to branch.  The Air Force will establish its rules, the Army a slightly different set, Special Operations another.

When you move from agency to agency they can be very different.  Each agency (DoD, NSF, NIH, DOE, etc.) has there own guidance concerning direct and indirect charges.  Costs that are allowable within one agency will be unallowable in another.  Some agencies limit what costs can be included in your indirect base pools, while other agencies give you several options of what you can include in your indirect pools.  Some limit the amount you can burden on certain costs or allow exclusions of some costs from the act of burdening.  There are terms that are foreign to most people who are not in the industry, because their meaning is specific to government accounting; terms like burden, earned, accrued and deferred. 

ReliAscent has been navigating these waters for many years and has decades of experience in preparing cost proposals and certifications of cost and pricing.  We know all the regulatory guidance, the traditions and legacy “rules of the road”. Not every nuance is published in the government regulations.  In fact, there are so many tribal knowledge areas of government accounting within each organization that it is hard to keep up with them all.  Here at ReliAscent, we have specific personnel assigned to follow each agency.  We sit on the committees that provide guidance and rule changes within the major organizations.  We provide training to new businesses that are venturing into the government accounting world.  We provide guidance on managing and tracking costs to ensure that our clients stay compliant with the agency they are under contract.

Even entry level (phase I) cost proposals need some foresight.  Almost every phase I proposal I review from a new firm underestimates its indirect costs.  The truth is that they are so focused on the direct project that they forget the costs associated with running the office, keeping the lights on, providing health care, paid time off, computers, paper, pens, etc.  Most new participants into the government contract arena have no experience with the methodology and don’t understand what costs will be paid for by the contract when they are writing their initial proposal. In the end, they end up losing money or deferring their own wages to cover the costs that they should have put in the contract.

Once you go beyond the initial grant or phase I, then the costing game get increasingly difficult.  The rules for how you gather your costs, what is direct, indirect, allowable and unallowable can get confusing.  Generally, once you are past the first phase you must provide a certificate of cost and pricing along with your submission.  This certificate states that you have collected and accounted for your costs in the specified manner that is compliant.

Mistakes in your proposal can cost you big!  Make sure you have an expert in your corner to ensure that you don’t end up paying the government for the privilege of working for them!  ReliAscent can provide all the guidance you need to be successful from the beginning.  We have a team of experts who know the rules and pitfalls and will keep you and your company in the black!

- Brian Ormsby, ReliAscent

Cost Proposals, Indirect Rates, and CFO Services Resources

To learn more about our cost proposal, contract management, and outsourced CFO services, check out these great resources, and please do not hesitate to contact the experts at ReliAscent at any time:

If you would like to request cost proposal support services, please contact us today!

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