Model 9 – Fringe, Overhead, Facilities, Subcontract/Material Handling OH, and G&A

This model is just like Model 4 with the addition of an allocation center for facilities. A contractor may have some contracts that are primarily service oriented, while others may be more material intensive. In such a situation, the contracts that are material intensive may incur a much greater dollar amount in costs, but require less administrative effort.

G&A, in the other indirect rate models presented, is allocated on the basis of total cost input. However, in a situation where some contracts incur a disproportionate share of costs because they are material intensive, while the others are not, the contractor needs an alternative method for allocation of G&A in order for the allocation to be fair and reasonable. Additionally, there is a facilities pool which is an allocation center to allocate facilities costs to the other cost pools. This indirect rate model is provided for this situation.

The administrative costs associated with handling of subcontracts and materials are accumulated into a separate subcontract/material handling cost pool. The base for allocating those costs consists of direct subcontract and material costs. This overhead pool will consists of costs such as administrative labor necessary for securing subcontractors and consultants, purchasing costs, receiving and warehousing costs. The resulting rate can then be bid on cost proposals where such costs are incurred. This will isolate the allocation of those costs to final cost objectives benefiting from those costs.

The base costs for the subcontract/material handling allocation (direct subcontract, consultant and materials costs) are excluded from the base for the allocation of G&A costs.