Uncompensated Overtime

How To Avoid Trouble With The DCAA

The Federal Acquisition Regulations define Uncompensated Overtime as:

“Uncompensated overtime” means the hours worked without additional compensation in excess of an average of 40 hours per week by direct charge employees who are exempt from the Fair Labor Standards Act. Compensated personal absences such as holidays, vacations, and sick leave shall be included in the normal work week for purposes of computing uncompensated overtime hours.

The FAR clause of 52.237-10 goes on to describe that the “adjusted hourly rate” shall be used in proposals where there is uncompensated overtime. This FAR clause defines the “adjusted hourly rate” as:

“Adjusted hourly rate (including uncompensated overtime)” is the rate that results from multiplying the hourly rate for a 40-hour work week by 40, and then dividing by the proposed hours per week which includes uncompensated overtime hours over and above the standard 40-hour work week. For example, 45 hours proposed on a 40-hour work week basis at $20 per hour would be converted to an uncompensated overtime rate of $17.78 per hour ($20.00 x 40 divided by 45 = $17.78).

The “adjusted hourly rate” method has 3 basic methods approved by the government including:
• Computing the adjusted hourly rate for each labor period
• Computing the adjusted hourly rate for the entire year
• Determining a “pro rata” allocation of total hours worked during the period and distributing salary cost based on the pro rata allocation.

ReliAscent utilizes the “adjusted hourly rate” method for dealing with uncompensated overtime as our preferred method. There are other methods that the DCAA has accepted, however, including a “distributing salary cost to overhead” method as described in the DCAA’s Contract Audit Manual in Chapter 6, para 410.5. This method requires very careful definition and administration as the DCAA will require additional evaluation to verify the system accurately reports costs and the government is not overpaying.

[1] FAR52.237-10 (a)

[1] FAR52.237-10 (a)

[1] http://www.dcaa.mil/cam/Chapter_06_-_Incurred_Costs_Audit_Procedures.pdf