WELCOME!
Small Business Boot Camp 3
What are Rates, Build Ups, Pricing
and Cost Centers?
Purpose
To Provide and useful overview of
components involved in building rates for all
types of service contracts i.e.: Cost Plus
Fixed Fee, Time and Material, Cost Plus
Award Fee, Firm Fixed Price
What is Direct Labor?
What is a Fully Burdened Rate?
How do I get a Fully Burdened Rate?
Can someone please explain what a cost center
is?
Direct Labor Rate
Fully Burdened Rate
Covers the basic labor cost
of the employee
Proposed by offeror to
cover direct labor, indirect
costs, and profit under a
service contract.
• FRINGE BENEFITS
• DEFINITION: The costs associated with
benefits provided to employees working for
the corporation.
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FRINGE BENEFITS
Paid Leave
Paid Holidays
Medical and Dental
Short and Long Term Disability
Life Insurance
Retirement Programs
Bonuses
Severance Pay
Social Security, Federal , and State Taxes
Employee Morale and Welfare
Tuition Assistance
Workman’s Compensation
• OVERHEAD (OH)
• DEFINITION: Overhead is traditionally defined
as costs to operate local corporate operations
providing indirect support to clients and direct
support to contractor employees working for
the client. Overhead costs are usually broken
down into two separate rates:
• OVERHEAD (OH)
- CLIENT SITE: This is a rate normally applied to the cost
of a contractor who is working at a government or
client site.
- CORPORATE SITE: This is a rate normally applied to the
cost of a contractor who is working in support of a
client, but working at an off-site location. This rate is
normally higher for the client because the corporation
must pay for additional facilities and equipment to
provide the required support.
• OVERHEAD (OH)
• Supervisory Labor and Benefits
• Recruiting and Hiring
• Human Resource Support to Employees
• Security Clearance Processing
• Regional Office Staff Labor
• Operating Supplies/Materials
• Leases, Rent, and Utilities
• Repairs and Maintenance
• Licenses/Taxes
• Depreciation
• Travel
• Professional Development
• GENERAL AND ADMINISTRATIVE EXPENSES
(G&A)
• DEFINITION: Costs associated with the overall
management and operation of a business
(corporate headquarter costs).
• GENERAL AND ADMINISTRATIVE EXPENSES
(G&A)
• Corporate Staff Labor & Benefits
• Operating Supplies/Materials
• Leases, Rent, and Utilities
• Repairs and Maintenance
• Licenses/Taxes/Insurance
• Accounting/Banking Fees
• Depreciation
• Travel/Conferences
• Business and Development
• Professional Development
• PROFIT
• DEFINITION: The dollar amount over and
above allowable costs that is paid to the firm
for contract performance.
• Remember that companies are in business to
make a profit, and that in addition to covering
the costs of running their businesses, they
must also make a profit for growth
(investment) and their shareholders (increase
shareholder equity).
• What is Fee then?
• Is it the same as profit?
• Wrap Rate
Someone said Wrap Rate. What is that?!
What is a good one?
Why does the Government look at that?
• So, I know what components make up pricing
so how does it work?
• What gets added to what?!
• Attachment 3 - Sub Pricing Model boot
camp.xls
Cost and Price Analysis
Determining whether the proposed labor and indirect
rates are fair and reasonable may require using
various evaluation techniques with input from
Government sources, such as:
Defense Contract Audit Agency (DCAA)
Administrative Contracting Officers (ACO)
Procuring Contracting Officer (PCO)
Cost and Price Analysis
We have all heard this one before:
COST REALISM…What the heck is that? Who
get to decide how realistic my pricing is and
why?
Let’s put the government on the spot.
Thank you!
And a big thank you to our panelist volunteers!!!