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The IMPORTANCE OF A Properly DESIGNED INDIRECT RATE STRUCTURE

The design of your indirect rate structure will have a significant impact on your company’s profitability, efficiency, and growth prospects. A poorly-designed indirect rate structure could have several negative consequences, to include:

Less than full recovery of your company’s indirect expenses through your billings to both federal and commercial customers
Lower profit or even a financial loss that jeopardizes the continued existence of your company
Painful audit adjustments from DCAA or other federal auditors resulting in large reimbursements paid to the federal government
Loss of productive time in handling federal audits which is better spent on business development and delivery of services and products
Loss of current federal contracts due to non-compliance with FAR and CAS regulations
Inability to bid on future federal contracts due to a non-compliant indirect rate structure
Low win-ratio on contract bids due to non-competitive bid rates that could have been optimized using GovBooks
Inability to obtain bank financing or paying too much for financing due to poor financial performance and reporting

To summarize, the design of your company’s indirect rate structure could be one of your most important financial decisions. GovBooks allows you to customize and experiment with thousand of indirect rate structures to optimize your financial strategy.

When we implement your GovBooks system, we will consult with you on how to design your indirect rate structure. However, your company will transform over time, and GovBooks allows you to change your indirect rate structure. Given the importance of any changes to your indirect rate structure, we advise you to schedule a Help Desk appointment to have us review your set up in the Pool Setup Wizard and the Account Assignment screen.

SAMPLE INDIRECT RATE STRUCTURES

The following indirect rate structures are meant to serve as examples for instructional purposes only and do not represent our advice for your particular company. However, these examples are the most common indirect rate structures that are deployed by federal contractors, but please keep in mind that your company may decide that additional customization is required, with additional pools and service centers. GovBooks is able to customize thousands of different indirect rate structures. If you need help in designing your indirect rate structure, please do contact our Help Desk.

Please click on an example below to learn how to set up these indirect rate structures in GovBooks.

Three-tier, total cost input
Two-tier, total cost input
One-tier, total cost input
Value-added
Direct labor input only