Model 8 – Fringe, Company Site Overhead, Client Site Overhead, Facilities, and G&A

This model is just like Model 3 with the addition of an allocation center for facilities. Companies having direct charge employees working at client sites will use this indirect rate model. Because the company does not have to provide office space and the related overhead that goes with providing a work site for those employees, a contractor will need to separate those employees into a separate cost pool. Consequently, the chart of accounts must contain a client-site direct labor account separate from the company-site direct labor. It must also contain a separate overhead pool for the indirect costs incurred to support the performance of contract work by these client-site workers.

By isolating the client-site direct labor and related overhead, the contractor can compute and bid a separate overhead rate for those workers, resulting in more competitive cost proposals and a cost savings to the client. Additionally, there is a facilities pool which is an allocation center to allocate facilities costs to the other cost pools.

The fringe pool will be accumulated in the same manner as in the other models, and will be allocated based on total labor. Fringe on direct labor is allocated to final cost objectives, fringe on overhead labor is allocated to the overhead pool, and fringe on G&A and B&P labor are allocated to the G&A pool.

The overhead rates are computed based on the related direct labor, respectively. Company-site direct labor (along with company-site B&P labor) is the base for company-site overhead. Client-site direct labor (along with any client-site B&P labor) is the base for client-site overhead.