DOT Position

DOT has questioned certain bonus costs, specifically costs associated with Contractor’s Incentive Compensation Program (ICP). The reason these costs are questioned is the ICP plan does not apply to all employees which violates DOT and FAR policy.

Contractor Response

We inspected DOT written policy that provides for the allowability of bonus costs but we found no reference to bonus plans that do not include all employees to be unallowable.  FAR 31.205-6 states that bonuses paid as part of a contractor’s established practices are allowable and it makes no distinction between bonus costs applicable to all employees or certain groups of employees.  It is normal industry practice to have a wide variety of bonus plans, some of which apply to all employees while most bonus plans apply to only certain groups of employees because most bonus are oriented to specific company goals where some groups of employees obviously contribute more than others for achieving these goals and hence only selected employees participate in the bonus plan.  For example, goals of increasing sales, improving shop floor quality, creating innovative designs and improving management results commonly result in bonus plans oriented to certain categories of employees such as, in our example, sales people, factory employees, engineers and senior management, respectively. These costs are clearly allowable even though this component of the overall bonus program may not apply to all employees.

 

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To discuss your needs, contact Bill Lennett, Principal, at 1-925-362-0712 or email him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

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